UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE QUARTERLY PERIOD ENDED December 31, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
Commission File Number 333-61610
BRAINSTORM CELL THERAPEUTICS INC.
(Exact name of small business issuer as specified in its charter)
Washington 912061053
---------- ---------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1350 Avenue of the Americas
New York, NY 10019
----------------------------------------
(Address of principal executive offices)
212-557-9000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 is a shell company (as defined in
Rule 12b-2 of the Exchange Act): Yes [ ] No [X]
The number of shares outstanding of the Issuer's common stock, $0.00005 par
value, as of December 31, 2005 was 22,469,683.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
(Formerly: Golden Hand Resources Inc.)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2005
IN U.S. DOLLARS
UNAUDITED
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
In U.S. dollars
December 31, March 31,
2005 2005
----------- -----------
Unaudited
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 86,743 526,519
Restricted cash 29,329 31,134
Accounts receivable and prepaid expenses 28,408 87,566
----------- -----------
Total current assets 144,480 645,219
----------- -----------
SEVERANCE PAY FUND 23,671 5,871
----------- -----------
PROPERTY AND EQUIPMENT, NET 420,915 228,315
----------- -----------
Total assets 589,066 879,405
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Trade payables 208,136 37,850
Other accounts payable and accrued expenses 520,631 131,232
----------- -----------
Total current liabilities 728,767 169,082
----------- -----------
ACCRUED SEVERANCE PAY 23,671 5,871
----------- -----------
Total liabilities 752,438 174,953
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Share capital:
Common stock of $ 0.00005 par value - Authorized: 200,000,000 shares at
December 31, 2005 and at March 31, 2005; Issued and outstanding: 22,469,683
and 20,867,808 shares at December 31, 2005 and at March 31, 2005 respectively
(Note 5) 1,125 1,044
Preferred stock of $ 0.00005 par value - Authorized: 40,000,000 shares at
December 31, 2005 and at March 31, 2005; none issued -- --
Additional paid-in capital 24,356,809 25,100,625
Deferred stock-based compensation (2,817,024) (5,394,735)
Deficit accumulated during the development stage (21,,704,282) (19,002,482)
----------- -----------
Total stockholders' equity (deficiency) (163,372) 704,452
----------- -----------
Total liabilities and stockholders' equity (deficiency) 589,066 879,405
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
Period from
September 22,
2000
(inception
Three months ended Nine months ended date) through
December 31, December 31, December 31,
-------------------------- -------------------------- -----------
2005 2004 2005 2004 2005
----------- ----------- ----------- ----------- -----------
Unaudited
-----------------------------------------------------------------------
Operating costs and expenses:
Research and development cost 278,834 426,000 770,766 426,000 1,242,808
Research and development expenses
related to shares, warrants and
options granted to employees and
service providers 61,298 15,873,048 84,209 15,873,048 15,962,660
General and administrative 239,847 113,565 711,380 113,565 976,511
General and administrative
expenses related to shares,
warrants and options granted to
employees and service providers 334,997 189,141 1,110,368 1,766,790 3,321,790
----------- ----------- ----------- ----------- -----------
Total operating expenses 914,976 16,601,754 2,676,723 18,179,403 21,503,769
Financial expenses, net 435 1,457 2,223 1,799 8,219
----------- ----------- ----------- ----------- -----------
Loss before income taxes (915,411) (16,603,211) (2,678,946) (18,181,202) (21,511,988)
Income taxes 8,476 -- 22,854 -- 28,323
----------- ----------- ----------- ----------- -----------
Loss from continuing operations (923,887) (16,603,211) (2,701,800) (18,181,202) (21,540,311)
Net loss from discontinued
operations -- -- -- (1,284) (163,971)
----------- ----------- ----------- ----------- -----------
Net loss (923,887) (16,603,211) (2,701,800) (18,182,486) (21,704,282)
=========== =========== =========== =========== ===========
Basic net loss per share from
continuing operations (0.04) (0.816) (0.124) (1.206)
=========== =========== =========== ===========
Basic net loss per share from
discontinued operations -- -- -- (*
=========== =========== =========== ===========
Weighted average number of shares
outstanding 22,331,096 20,343,706 21,797,624 15,076,203
=========== =========== =========== ===========
(* Less then $ 0.01
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
Common stock Additional Receipts on
-------------------------- paid-in account of
Number Amount capital shares
----------- ----------- ----------- -------
Balance as of September 22, 2000 (inception date) -- -- -- --
Stock issued on September 22, 2000 for cash at $ 0.00188 per share 8,500,000 850 15,150 --
Stock issued on March 31, 2001 for cash at $ 0.0375 per share 1,600,000 160 59,840 --
Contribution of capital -- -- 7,500 --
Net loss -- -- -- --
----------- ----------- ----------- -------
Balance as of March 31, 2001 10,100,000 1,010 82,490 --
Contribution of capital -- -- 11,250 --
Net loss -- -- -- --
----------- ----------- ----------- -------
Balance as of March 31, 2002 10,100,000 1,010 93,740 --
Contribution of capital -- -- 15,000 --
Net loss -- -- -- --
----------- ----------- ----------- -------
Balance as of March 31, 2003 10,100,000 1,010 108,740 --
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 5 6,495 --
Cancellation of shares granted to Company's President (10,062,000) (503) 503 --
Contribution of capital -- -- 15,000 --
Net loss -- -- -- --
----------- ----------- ----------- -------
Balance as of March 31, 2004 10,238,000 512 130,738 --
Stock issued on June 24, 2004 for private placement at $ 0.01 per
share, net of $ 25,000 issuance expenses 8,510,000 426 59,749 --
Stock-based compensation related to shares granted to service
providers 2,025,000 101 1,632,699 --
Contribution of capital -- -- 7,500 --
Stock issued in 2004 for private placement at $ 0.75 per unit (Note
6c(2)) 1,894,808 95 1,418,042 --
Cancellation of shares granted to service providers (Note 6c(6)) (1,800,000) (90) 90 --
Deferred stock-based compensation related to options granted to
employees -- -- 5,978,759 --
Amortization of deferred stock-based compensation related to options
granted to employees -- -- -- --
Compensation related to options granted to service providers -- -- 15,873,048 --
Net loss -- -- -- --
----------- ----------- ----------- -------
Balance as of March 31, 2005 20,867,808 1,044 25,100,625 --
----------- ----------- ----------- -------
Deficit
accumulated Total
Deferred during the stockholders'
stock-based development equity
compensation stage (deficiency)
------------ ----------- -----------
Balance as of September 22, 2000 (inception date) -- -- --
Stock issued on September 22, 2000 for cash at $ 0.00188 per share -- -- 16,000
Stock issued on March 31, 2001 for cash at $ 0.0375 per share -- -- 60,000
Contribution of capital -- -- 7,500
Net loss -- (17,026) (17,026)
----------- ----------- -----------
Balance as of March 31, 2001 -- (17,026) 66,474
Contribution of capital -- -- 11,250
Net loss -- (25,560) (25,560)
----------- ----------- -----------
Balance as of March 31, 2002 -- (42,586) 52,164
Contribution of capital -- -- 15,000
Net loss -- (46,806) (46,806)
----------- ----------- -----------
Balance as of March 31, 2003 -- (89,392) 20,358
2 for 1 stock split -- -- --
Stock issued on August 31, 2003 to purchase mineral option at $ 0.065
per share -- -- 6,500
Cancellation of shares granted to Company's President -- -- --
Contribution of capital -- -- 15,000
Net loss -- (73,295) (73,295)
----------- ----------- -----------
Balance as of March 31, 2004 -- (162,687) (31,437)
Stock issued on June 24, 2004 for private placement at $ 0.01 per
share, net of $ 25,000 issuance expenses -- -- 60,175
Stock-based compensation related to shares granted to service
providers -- -- 1,632,800
Contribution of capital -- -- 7,500
Stock issued in 2004 for private placement at $ 0.75 per unit (Note
6c(2)) -- -- 1,418,137
Cancellation of shares granted to service providers (Note 6c(6)) -- -- --
Deferred stock-based compensation related to options granted to
employees (5,978,759) -- --
Amortization of deferred stock-based compensation related to options
granted to employees 584,024 -- 584,024
Compensation related to options granted to service providers -- -- 15,873,048
Net loss -- (18,839,795) (18,839,795)
----------- ----------- -----------
Balance as of March 31, 2005 (5,394,735) (19,002,482) 704,452
----------- ----------- -----------
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
Common stock Additional
------------------------- paid-in
Number Amount capital
----------- ----------- -----------
Balance as of March 31, 2005 20,867,808 1,044 25,100,625
Stock issued on May 12, 2005 for private placement at $ 0.8 per share (Note6c(4)) 186,875 9 149,491
Stock issued on July 27, 2005 for private placement at $ 0.6 per share (Note 6c(5)) 165,000 8 98,992
Stock issued on November 10, 2005 for private placement at $ 0.8 per share
(Note 6c(6)) 312,500 16 224,984
Stock issued on December 07, 2005 for private placement at $ 0.8 per share
(Note 6c(6)) 187,500 10 134,990
Forfeiture of options granted to employees -- -- (2,231,735)
Deferred stock-based compensation related to shares granted to directors 200,000 10 486,490
Amortization of deferred stock-based compensation related to options and shares
granted to employees and directors -- -- --
Stock-based compensation related to options and shares granted to service providers 550,000 28 392,972
Net loss -- -- --
----------- ----------- -----------
Balance as of December 31, 2005 (unaudited) 22,469,683 1,125 24,356,809
=========== =========== ===========
Deficit
accumulated Total
Deferred during the stockholders'
stock-based development equity
compensation stage (deficiency)
------------- ------------- -----------
Balance as of March 31, 2005 (5,394,735) (19,002,482) 704,452
Stock issued on May 12, 2005 for private placement at $ 0.8 per share (Note6c(4)) -- -- 149,500
Stock issued on July 27, 2005 for private placement at $ 0.6 per share (Note 6c(5)) -- -- 99,000
Stock issued on November 10, 2005 for private placement at $ 0.8 per share
(Note 6c(6)) -- -- 225,000
Stock issued on December 07, 2005 for private placement at $ 0.8 per share
(Note 6c(6)) -- -- 135,000
Forfeiture of options granted to employees 2,231,735 -- --
Deferred stock-based compensation related to shares granted to directors (486,500) -- --
Amortization of deferred stock-based compensation related to options and shares
granted to employees and directors 832,476 -- 832,476
Stock-based compensation related to options and shares granted to service providers -- -- 393,000
Net loss -- (2,201,800) (2,701,800)
----------- ----------- -----------
Balance as of December 31, 2005 (unaudited) (2,718,024) (21,704,282) (163,372)
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
-5-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
In U.S. dollars
Period from
September 22,
2000 (inception
Nine months ended date) through
December 31, December 31,
-------------------------- -----------
2005 2004 2005
----------- ----------- -----------
Unaudited
-----------------------------------------
Cash flows form operating activities:
Net loss (2,701,800) (18,182,486) (21,704,282)
Less - loss for the period from discontinued operations -- 1,284 163,971
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 40,682 -- 40,928
Erosion of restricted cash 1,805 -- (29,329)
Expenses related to shares granted to service providers and
to non-employees 362,100 17,433,198 17,843,752
Amortization of stock based compensation related option
granted to employees 832,476 182,541 1,416,498
Decrease (Increase) in accounts receivable and prepaid
expenses 61,730 (31,450) (21,092)
Increase in trade payables 170,286 10,395 208,136
Increase in other accounts payable and accrued expenses 389,399 92,683 515,481
----------- ----------- -----------
Net cash used in continuing operating activities (843,322) (493,835) (1,565,937)
Net cash provided by (used in) discontinued operating activities -- 13,647 (22,766)
----------- ----------- -----------
Total net cash used in operating activities (843,322) (480,188) (1,588,703)
----------- ----------- -----------
Cash flows from investing activities
Purchase of property and equipment (202,382) (1,518) (430,942)
Investment in lease deposit (2,572) -- (7,162)
----------- ----------- -----------
Net cash used in investing activities (204,954) (1,518) (438,104)
Net cash flows used in discontinued investing activities -- -- (16,000)
----------- ----------- -----------
Total net cash used in investing activities (204,954) (1,518) (454,104)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of Common stock, net 608,500 766,234 2,086,809
----------- ----------- -----------
Net cash flows provided by continuing financing activities 608,500 766,234 2,086,809
Net cash flows provided by (used in) discontinued financing
activities -- (14,277) 42,741
----------- ----------- -----------
Total net cash flows provided by financing activities 608,500 751,957 2,129,550
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents (439,776) 270,251 86,743
Cash and cash equivalents at beginning of the period 526,519 4,604 --
----------- ----------- -----------
Cash and cash equivalents at end of the period 86,743 274,855 86,743
=========== =========== ===========
Non-cash financing activities:
Non-cash financing activities from discontinued operations 30,900 -- 30,900
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
-6-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars
NOTE 1:- GENERAL
a. Brainstorm Cell Therapeutics Inc. (formerly: Golden Hand
Resources Inc.) ("the Company") was incorporated in the
State of Washington on September 22, 2000.
b. On July 31, 2003, the Company acquired an option to
purchase the Dalhousie Mineral Claim, situated in Canada.
The purchase price was $ 10,000 and was made by way of a
promissory note. On October 6, 2003, the Company issued
100,000 shares to the vendor pursuant to the agreement
c. On May 21, 2004, the former major shareholders of the
Company entered into a purchase agreement with a group of
private investors, who purchased from the former major
shareholders 6,880,000 shares of the then issued and
outstanding 10,238,000 shares of the Company's Common
stock.
d. The Company acquired the right to market and sell a digital
data recorder product line in certain States in the U.S.
The license was acquired on September 22, 2000 and had a
four-year term. Under the terms of the license agreement,
the Company purchased products and resold them.
On May 4, 2004, the Company amended the license agreement
to a worldwide non-exclusive license. Due to the
non-exclusivity of the license, the Company could not
determine whether the license would generate any future
sales. As a result, in the first quarter of 2004, the
Company recognized impairment in the value of the license,
which has been charged to the statement of operations.
Since the end of the first quarter of 2004, the Company has
not been engaged in any activities related to the sale of
the digital data recorder product.
e. On July 8, 2004, the Company entered into a licensing
agreement with Ramot of Tel Aviv University Ltd. ("Ramot"),
an Israeli corporation, to acquire certain stem cell
technology (see Note 3). Subsequent to this agreement, the
Company decided to change its line of business and to focus
on the development of novel cell therapies for
neurodegenerative diseases, particularly, Parkinson's
disease, based on the acquired technology and research to
be conducted and funded by the Company.
Following the licensing agreement dated July 8, 2004, the
management of the Company has decided to abandon all
activities related to the sale of the digital data recorder
product. The discontinuation of this activity was accounted
for under the provision of SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets".
f. On October 25, 2004, the Company formed a wholly-owned
subsidiary in Israel, Brainstorm Cell Therapeutics Ltd.
("BCT) which provides research, development and other
services to the Company.
-7-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars
NOTE 1:- GENERAL (Cont.)
g. As of December 31, 2005, the Company had an accumulated
deficit, working capital deficiency and shareholders
deficiency of $ 21,704,282, $ 584,287 and $ 163,372
respectively and incurred negative cash flows from
operating activities in the amount of $ 845,124 for the
nine months ended December 31, 2005. In addition, the
Company has not yet generated any revenues
These factors raise substantial doubt about the Company's
ability to continue it's operations as a going concern. The
financial statements do not include any adjustments with
respect to the carrying amounts of assets and liabilities
and their classification that might be necessary should the
Company be unable to continue as a going concern
The Company's ability to continue to operate as a going
concern is dependent upon additional financial support.
The Company is in the process of raising additional capital
to fund its operations (see Note 6c(6)). In the event the
Company is unable to successfully raise capital and
generate revenues, it is unlikely that the Company will
have sufficient cash flows and liquidity to finance its
business operations as currently contemplated.
h. Risk factors:
The Company depends on Ramot to conduct its research and
development activities. As discussed in Note 3, the Company
is currently in negotiations with Ramot for additional
deferral of the payment due to it pursuant to the research
and development agreement. In case a deferral of payment
will not be obtained, the Company will be in breach of the
agreement and Ramot may terminate the research and license
agreement.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies applied in the
consolidated financial statements as of December 31, 2005,
are consistent with those applied in the consolidated
financial statements as of March 31, 2005.
These financial statements should be read in conjunction
with the audited annual financial statements of the Company
as of March 31, 2005 and their accompanying notes.
b. Accounting for share-based compensation:
The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB-25"), and FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock
Compensation" ("FIN 44") in accounting for its employee
stock options. Under APB-25, when the exercise price of the
Company's stock options is less than the market price of
the underlying stocks on the date of grant, compensation
expense is recognized over the option's vesting period.
-8-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Pro forma information regarding net loss and loss per share
is required by Statement of Financial Accounting Standard
No. 123, and has been determined assuming the Company had
accounted for its employee stock options under the fair
value method prescribed by that Statement. The fair value
for these options was estimated on the date of grant using
the Black-Scholes option pricing model, with the following
weighted-average assumptions for grants during the 9 months
period ended December 31, 2005: weighted average volatility
of 112%, risk-free interest rate of 4.46%, dividend yield
of 0% and an expected life of five years.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized as an expense over the
option's vesting period. The Company's pro forma
information is as follows:
Nine months ended
December 31,
----------------------------
2005 2004
----------- -----------
Unaudited
----------------------------
Net loss as reported 2,701,800 18,182,486
Deduct: share-based employee compensation expense included in
reported net loss in accordance with APB-25 (832,476) (182,541)
Add: stock-based employee compensation expense determined
under fair value method 956,542 194,698
----------- -----------
Pro forma net loss 2,825,866 18,194,643
=========== ===========
Pro forma net loss per share (basic) 0.130 1.207
=========== ===========
The Company applies SFAS 123 and EITF 96-18, "Accounting
for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling,
Goods or Services" ("EITF 96-18") with respect to options
and warrants issued to non-employees.
SFAS 123 and EITF 96-18 require the use of an option
valuation model to measure the fair value of the options at
the grant date.
-9-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c. Interim 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 December 31, 2005 and for the
nine months then ended, in accordance with accounting
principles generally accepted in the United States relating
to the preparation of financial statements for interim
periods. Accordingly, they do not include all the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
nine months period ended December 31, 2005 are not
necessarily indicative of the results that may be expected
for the year ended March 31, 2006.
d. Impact of recently issued Accounting Standards:
On December 16, 2004, the Financial Accounting Standards
Board (FASB) issued FASB Statement No. 123 (revised 2004),
"Share-Based Payment" ("Statement 123(R)"), which is a
revision of FASB Statement No. 123, Accounting for
Stock-Based Compensation. Statement 123(R) supersedes APB
25, and amends FASB Statement No. 95, "Statement of Cash
Flows". Generally, the approach in Statement 123(R) is
similar to the approach described in Statement 123.
However, Statement 123(R) requires all share-based payments
to employees, including grants of employee stock options,
to be recognized in the income statement based on their
fair values. Pro forma disclosure is no longer an
alternative. The new Standard will be effective for the
Company in the first interim period beginning after April
1, 2006.
As permitted by Statement 123, the Company currently
accounts for share-based payments to employees using APB
25's intrinsic value method. Accordingly, the adoption of
Statement 123(R)'s fair value method will have a
significant impact on the Company result of operations,
although it will have no impact on the Company overall
financial position. The impact of adoption of Statement
123(R) cannot be predicted at this time because it will
depend on levels of share-based payments granted in the
future. However, had the Company adopted Statement 123(R)
in prior periods, the impact of that standard would have
approximated the impact of Statement 123 as described in
the disclosure of pro forma net loss and loss per share in
Note 2b to the consolidated financial statements.
In March 2005, the SEC issued Staff Accounting Bulletin No.
107 ("SAB 107") to give guidance on implementation of
Statement 123R, which the Company will consider in
implementing statement 123R.
-10-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 3:- RESEARCH AND LICENSE AGREEMENT
On July 8, 2004, the Company entered into a research and license
agreement ("the agreement") with Ramot, the technology transfer
company of Tel Aviv University Ltd. The license agreement grants
the Company an exclusive, worldwide, royalty-bearing license to
develop, use and sell certain stem cell technology. In
consideration of the license, the Company was required to remit an
upfront license fee payment of $ 100,000; royalties at a rate of
5% of all net sales of products and 30% of all sublicense
receipts. In addition, the Company granted Ramot and certain of
its designees fully vested warrants to purchase 10,606,415 shares
of its Common stock at an exercise price of $ 0.01 per share. The
Company will also fund, through Ramot, further research in
consideration of $ 570,000 per year for an initial two-year period
and for a further two-year period if certain research milestones
are met. Ramot has agreed to defer the second, third, forth and
fifth research payments until March 1, 2006. The Company is
currently in negotiations with Ramot for additional deferral of
its payment obligation pursuant to the agreement. Ramot may
terminate the agreement if the Company fails to reach certain
development milestones or materially breaches the agreement.
The warrants issued pursuant to the agreement were issued to Ramot
and its designees effective as of November 4, 2004. Each of the
warrants is exercisable for a five-year period beginning on
November 4, 2005. Ramot and its designees were granted certain
registration rights.
Ramot has instructed the Company that the warrants will be issued
as follows: Ramot shall be issued 60% of the warrants, the two
consultants ,or trustees for their benefits, shall each be issued,
in addition to the consultants' warrants described in Note 4, 15%
of the Ramot warrants, Mr. Yosef Levy, a member of the research
team, shall be issued 8% of the Ramot warrants and Mrs. Pnina
Green, a member of the research team , shall be issued 2% of Ramot
warrants.
On March 21, 2005, the Company entered into lock up agreements
with Ramot with respect to warrants held by Ramot .Under the
lock-up agreements, Ramot may not transfer its securities to
anyone other than permitted transferees without the prior consent
of the Company's Board of Directors, for the period of time as
follows: (i) eighty-five percent (85%) of the securities shall be
restricted from transfer for the twenty-four-month period
following July 8, 2004 and (ii) fifteen percent (15%) of the
securities shall be restricted from transfer for the twelve-month
period following July 8, 2004.As of December 31, 2005, 15% of the
securities are exercisable .
NOTE 4:- CONSULTING AGREEMENTS
On July 8, 2004, the Company entered into two consulting
agreements with Prof. Eldad Melamed and Dr. Daniel Offen (together
"the Consultants"), upon which the Consultants shall provide the
Company with scientific and medical consulting services in
consideration for a monthly payment of $ 6,000 each. In addition,
the Company granted each of the Consultants a fully vested warrant
to purchase 1,097,215 shares of the Company's Common stock, at an
exercise price of $ 0.01 per share. The warrants issued pursuant
to the agreement were issued to the Consultants effective as of
November 4, 2004. Each of the warrants is exercisable for a
five-year period beginning on November 4, 2005. The compensation
related to the warrants, in the amount of $ 2,721,093, was
recorded as research and development expenses.
-11-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 4:- CONSULTING AGREEMENTS (Cont.)
On March 21, 2005, the Company entered into lock up agreements
with the Consultants with respect to warrants held by them .Under
the lock-up agreements, the Consultants may not transfer their
securities to anyone other than permitted transferees without the
prior consent of the Company's Board of Directors, for the period
of time as follows: (i) eighty-five percent (85%) of the
securities shall be restricted from transfer for the
twenty-four-month period following July 8, 2004 and (ii) fifteen
percent (15%) of the securities shall be restricted from transfer
for the twelve-month period following July 8, 2004. As of December
31, 2005 15% of the securities are exercisable.
NOTE 5:- COMMITMENTS AND CONTINGENT LIABILITIES
On November 10, 2005 Dr. Yaffa Beck resigned from her position as
Chief Executive Officer and director of the Company. Mr. Yoram
Drucker the Company's Chief Operating Officer, has assumed Dr.
Beck's responsibilities as the Company principal executive officer
immediately. Dr. Beck indicated her belief that she was
terminating her employment for "constructive discharge" as such
term is defined in her employment agreement. To the extent that
this would have been true, Dr. Beck would have been entitled to
acceleration of vesting of all her outstanding options (which will
cause recognition of compensation expenses in the amount of $
1,242,325) as well as to six months salary pay. Dr. Beck claims
the company should pay her an aggregate amount of $182 thonsand.
The Company believes that Dr. Beck's claim lack merit and intends
to dispute it vigorously. The company provided in its books
adequate provision in respect of such a claim.
NOTE 6:- STOCK CAPITAL
a. The rights of Common stock are as follows:
Common shares confer their holders the right to receive
notice to participate and vote in general meetings 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 company's Common stock is registered and publicly
traded on the Over-the-Counter Bulletin Board service of
the National Association of Securities Dealers, Inc. under
the symbol BCLI.
b. The former president of the Company donated services valued
at $ 6,000 and rent valued at $ 1,500 for the six months
ended September 30, 2004. These amounts were charged to the
statement of operations as part of discontinued operations
and classified as additional paid-in capital in the
stockholders' equity.
c. Issuance of shares, warrants and options:
Private placements
1. On June 24, 2004, the Company issued to investors
8,510,000 Common shares for total proceeds of
$ 60,175 (net of $ 25,000 issuance expenses).
-12-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 6:- STOCK CAPITAL (Cont.)
2. On February 23, 2005, the Company completed a
private placement for the sale of 1,894,808 units
for total proceeds of $ 1,418,137. Each unit
consists of one share of Common stock, a one-year
warrant to purchase one share of Common stock at $
1.50 per share and a three-year warrant to purchase
one share of Common stock at $ 2.50 per share. This
private placement was consummated in four tranches
which closed in between October 2004 and February
2005.
3. On March 21, 2005, the Company entered into lock up
agreements with its 29 shareholders with respect to
15,290,000 shares held by them. Under these lock-up
agreements, these security holders may not transfer
their shares to anyone other than permitted
transferees without the prior consent of the
Company' Board of Directors, for the period of time
as follows: (i) eighty-five percent (85%) of the
securities shall be restricted from transfer for the
twenty-four-month period following July 8, 2004 and
(ii) fifteen percent (15%) of the securities shall
be restricted from transfer for the twelve-month
period following July 8, 2004.
4. On May 12, 2005, the Company issued to a certain
investor 186,875 shares of its Common stock for
total proceeds of $ 149,500 at a price per share of
$ 0.8.
5. On July 27, 2005, the Company issued to certain
investors 165,000 shares of its Common stock for
total proceeds of $ 99,000 at a price per share of $
0.6.
6. On August 11, 2005, the Company signed a private
placement agreement ("PPM") with investors for the
sale of 1,250,000 units at a price per unit of $
0.8. Each unit consists of one Common share and one
warrant to purchase one Common share at $1.00 per
share. The warrants are exercisable for a period of
three years from issuance. On September 30, 2005 the
Company sold 312,500 units for total net proceeds of
$225,000. On December 7, 2005, the Company sold
187,500 units for total net proceed of $135,000.
Stock option plan
On November 25, 2004, the Company's shareholders approved
the 2004 Global Share Option Plan and the Israeli Appendix
thereto (which applies solely to participants who are
residents of Israel) and on March 28, 2005 the Company's
shareholders approved the 2005 U.S. Stock Option and
Incentive Plan, and the reservation of 9,143,462 shares of
Common stock for issuance in aggregate under these stock
option plans.
Unless sooner terminated, the options shall terminate ten
(10) years from the date of grant.
As of December 31, 2005, 4,803,115 warrants and shares were
issued under the plans (3,589,452 to employees and
directors and 1,213,663 options to service providers, see
note 6(c)10 and 6(c)11) leaving 4,340,347shares available
for future grants.
-13-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 6:- STOCK CAPITAL (Cont.)
Shares and warrants to service providers
1. On June 1 and June 4, 2004, the Company issued
40,000 and 150,000 Common shares for filing services
and legal and due-diligence services for 12 months
with respect to private placement, respectively.
Compensation expenses related to filing services,
totaling $ 26,400, are amortized over a period of 12
months. Compensation related to legal services,
totaling $ 105,000 was recorded as equity issuance
cost and did not effect the statement of operations.
2. On August 10, 2004, the Company issued 1,800,000
shares to two consultants for past and future
consulting services. The compensation is deemed
earned upon the issuance of the shares. As a result,
compensation expenses, totaling $ 1,530,000, were
charged to the statement of operations for the year
ended March 31, 2005.
On December 23, 2004, the consultants
surrendered the shares to the Company and the shares
were cancelled and are considered authorized but
unissued shares. Instead of the cancelled shares,
the consultants were granted immediately vested
options to purchase 1,800,000 shares of the Company,
exercisable for a period of ten years at an exercise
price of $ 0.0005 per share. The compensation is
deemed earned upon the issuance of the option.
3. On July 1 and September 22, 2004, the Company issued
20,000 and 15,000 shares to a former director for
financial services for the first and second quarters
of 2004, respectively. Compensation expenses,
totaling $ 22,000 and $ 16,950, were charged to the
statement of operations for the year ended March 31,
2005.
4. On November 4, 2004, the Company granted Ramot,
10,606,415 warrants at an exercise price of $ 0.01
per share (see Note 3).
5. On November 4, 2004, the Company granted two
consultants 2,194,430 warrants at an exercise
price of $ 0.01 per share (see Note 4).
6. On February 10, 2005, the Company signed an
agreement with one of its service providers
according to which the Company shall issue to the
service provider 100,000 shares of restricted
stock at a purchase price of $ 0.00005 under the
U.S Stock Option and Incentive Plan of the
Company. The restricted shares will be subject to
the Company's right to repurchase them within one
year of the grant date as follows: (i) in the
event that the service provider breaches his
obligations under the agreement, the Company shall
have the right to repurchase the restricted shares
at a purchase price equal to par value; and (ii)
in the event that the service provider has not
breached his obligations under the agreement, the
Company shall have the right to repurchase the
restricted shares at a purchase price equal to the
then fair market value of the restricted shares.
The restricted shares were issued in June 2005.
-14-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 6:- STOCK CAPITAL (Cont.)
7. In March and April 2005, the Company signed an
agreement with four members of its Scientific
Advisory Board according to which the Company shall
issue to the members of the Scientific Advisory
Board 400,000 shares of restricted stock at a
purchase price of $ 0.00005 under the U.S Stock
Option and Incentive Plan (100,000 each). The
restricted shares are subject to the Company's right
to repurchase them if the grantees cease to be
members of the Company's Advisory Board for any
reason. The restrictions of the shares shall lapse
in three annual and equal portions commencing with
the grant date. The restricted shares were issued in
June 2005.
8. On May 16, 2005, the Company issued to a financial
consultant warrants to purchase 47,500 shares of the
Company's Common stock, at an exercise price of $
1.62 per share. The warrants are fully vested and
exercisable over a term of five years. The
compensation related to the warrants, in the amount
of $ 64,125, was recorded as general and
administrative expenses.
9. On June 6, 2005, the Company granted the constructor
of its facility options to purchase 30,000 of the
Company's Common stock at an exercise price of $
0.75 per share as part of the agreement signed on
March 23, 2005. The warrants are fully vested and
exercisable over a term of five years. The
compensation related to the warrants, in the amount
of $ 30,900, was recorded as property and equipment.
10. On July 7, 2005, the Company issued 50,000 Common
shares for filing services for 12 months. The
compensation related to the shares, in the amount of
$ 37,500, was recorded as general and administrative
expenses.
11. On August 1, 2005, the Company granted to a
consultant warrant to purchase 36,000 Common shares
of the Company at an exercise price of $ 0.75 per
share. The options vest over a period of three years
commencing the grant date, and exercisable over a
term of five years.
12. On August 30, 2005, the Company granted to its legal
advisor warrants to purchase 70,000 Common shares of
the Company at an exercise price of $ 0.15 per
share. The warrants are in lieu of $ 53,900 payable
to the legal advisor, are fully vested at grant date
and expire after three years.
13. On September 9, 2005 and December 20, 2005 the
Company granted to a consultant for services
regarding project supported by European commission
warrants to purchase 3,000 and 20,000, respectively,
Common shares of the Company at an exercise price of
$ 0.15 per share. The warrants are fully vested upon
the grant date and expire after three years. The
aggregate compensation related to the warrants, in
the amount of $ 11,530, was recorded as general and
administrative expenses.
-15-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 6:- STOCK CAPITAL (Cont.)
14. On December 14, 2005, the Company granted to its
technology and development advisor 457,163 warrants
to purchase the Company's Common shares at an
exercise price of $ 0.70 per share. The options vest
over a period of three years beginning on August 1,
2005 and shall be exercisable over a term of ten
years. The compensation related to the shares, in
the amount of $ 33,866 was reduced as research and
development expenses.
Options and shares to employees and to directors
1. On May 27, 2005, the Company granted to two of its
directors 200,000 restricted shares (100,000 each).
The restricted shares are subject to the Company's
right to repurchase them at a purchase price of par
value ($ 0.00005). The restrictions of the shares
shall lapse in three annual and equal portions
commencing with the grant date.
2. On May 27, 2005, the Company granted to one of its
directors an option to purchase 100,000 shares of
its Common stock, at an exercise price of $ 0.75.
The options shall vest in three annual and equal
portions commencing the grant date.
3. On November 14, 2005, the Company granted to one of
its employees an option to purchase 250,000 shares
of its Common stock, at an exercise price of $ 0.75.
The options shall vest in three annual and equal
portions commencing the grant date.
NOTE 7:- SUBSEQUENT EVENTS
a. On January 7, 2006, the Company signed an agreement with a
public relation consultant according to which the Company
shall issue to the service provider 150,000 shares of
restricted stock at a purchase price of $ 0.00005 under the
U.S Stock Option and Incentive Plan of the Company. The
restricted shares will be subject to the Company's right to
repurchase them within one year of the grant date, in the
event that the service provider breaches its obligations
under the agreement or in the event the agreement is
terminated. The shares have not yet been issued.
b. On January 4, 2006, the Company signed an agreement with a
public relation consultant, according to which the Company
shall issue to the consultant 200,000 shares of restricted
stock at a purchase price of $ 0.00005 under the U.S Stock
Option and Incentive Plan of the Company. The restricted
shares will be subject to the Company's right to repurchase
them within one year of the grant date, in the event that
the service provider breaches its obligations under the
agreement or in the event the agreement is terminated. The
shares have not yet been issued.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
NOTE 7:- SUBSEQUENT EVENTS (Cont.)
In addition, the Company shall grant the consultant option
to purchase 230,000 shares of the Company's Common stock at
a purchase price of $ 0.65 per share. The options shall
vest in three annual and equal portions commencing the
grant date' and shall be exercisable over a term of ten
years.
c. On January 8, 2006, the Company signed an agreement with a
service provider, according to which the Company shall
grant to the service provider 8,000 options to purchase
shares of the Company's Common stock at a purchase price of
$0.15 per share. The options shall vest in one year
commencing with the grant date, and shall be exercisable
over a term of five years.
- - - - - - - - - - - - - - - -
-16-
ITEM 2. PLAN OF OPERATION
Forward-Looking Statements
This report contains forward-looking statements relating to future events and
our future performance within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including, without limitation, statements regarding our expectations,
beliefs, intentions or future strategies that are signified by the words "may",
"will", "should", "plans", "expects", "anticipates", "intends", "believes",
"estimates", "predicts", "continue" or similar language. Actual results could
differ materially from those anticipated in such forward-looking statements. All
forward-looking statements included in this document are based on information
available to us on the date hereof. 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 immediately if they do. 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.
Overview
Since July 8, 2004, the Company's business has focused on development of adult
stem cell therapies for treatment of neurodegenerative diseases. The Company's
business activities are based on technology, know-how and patent applications
exclusively licensed world-wide from Ramot at Tel Aviv University Ltd.
("Ramot"). Under the terms of the Research and License Agreement with Ramot
(which are described in more detail below), Ramot granted to us an exclusive
license to (a) certain stem cell technology developed at the Felsenstein Medical
Research Center of Tel Aviv University and related patent applications, and (b)
the results of further research to be performed at Tel Aviv University relating
to this technology under the supervision of Professor Eldad Melamed and Dr.
Daniel Offen, the lead inventors.
Stem Cell Therapy
Our activities are within the overall 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:
embryonic stem cells ("ESC"), isolated from the inner mass of a few days old
embryo, and adult stem cells, sourced from bone marrow, cord blood and various
organs. Although embryonic stem cells 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. Thus, 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.
Parkinson's Disease ("PD")
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. Thus, prevalence 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 an annual $26 billion 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.
-17-
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 about 15 years.
Current Treatments
Current drug therapy for PD 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 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 a
year in the U.S 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.
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 brain. About 300 such fetal
transplants have already been performed and some benefit has 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.
Amyotrophic Lateral Sclerosis ("ALS")
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 5,600 people in the U.S. are diagnosed with ALS each year. It is
estimated that as many as 30,000 Americans may have the disease at any given
time, with 100,000 across the Western world. Consequently, the total estimated
cost of treating ALS patients is approximately $1.25 billion.
Description
Early symptoms of ALS often include increasing muscle weakness or stiffness,
especially involving the arms and legs, speech, swallowing or breathing.
-18-
ALS is most often found in the 40 to 70 year age group, where it is actually
quite common, 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 Treatment
The physician bases medication decisions on the patient's symptoms and the stage
of the disease. Some medications used for ALS patients include:
|_| 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.
|_| Baclofen or Diazepam - these medications may be used to control muscle
spasms, stiffness or tightening (spasticity) that interfere with daily
activities.
|_| Trihexyphenidyl or Amitriptyline - these medications may help patients
who have excess saliva or secretions, and emotional changes.
Other medications may be prescribed to help reduce such symptoms as fatigue,
pain, sleep disturbances, constipation, and excess saliva and phlegm.
Our approach
We intend to focus our efforts to develop cell therapeutic treatments for PD
based on the expansion of human mesenchymal stem cells from adult bone marrow
and their differentiation into neuron like cells, such as neurons that produce
dopamine and astrocytes (glial cells) that produce GDNF. Our aim is to provide
neural stem cell transplants that (i) "replace" damaged dopaminergic nerve cells
and diseased tissue by augmentation with healthy dopamine producing cells; and
(ii) maintain, preserve and restore the damaged and remaining dopaminergic cells
in the patient's brain, protecting them from further degeneration.
In parallel, we will use the GDNF-secreted cells for cell therapy in ALS
patients. The motoneurons in those patients are rapidly degenerated in the limbs
followed by cell destruction in the spinal cords. In several studies over the
world GDNF have been shown to be highly protective, in both in-vitro and in-vivo
models of ALS. Therefore, we intend to restore the motoneurons cell bodies by
injecting the GDNF-secreted cells into the muscles and/or the spinal cords in
ALS patients.
The research team led by Prof. Melamed and Dr. Offen has achieved expansion of
human bone marrow mesenchymal stem cells and their differentiation into both two
types of brain cells, neurons and astrocytes, each having therapeutic potential,
as follows:
NurOwnTM program 1 - DA neuron-like cells - human bone marrow derived
dopamine producing neural cells for restorative treatment in Parkinson's
disease. 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
Parkinson's disease (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.
NurOwnTM program 2 - GDNF astrocyte-like cells - human bone marrow derived
GDNF producing astrocyte for treatment of Parkinson's disease, ALS and
spinal cord injury. In vitro differentiation of the expanded human bone
marrow derived mesenchymal stem cells in a special proprietary medium,
generated cells with astrocyte-like morphology that expressed astrocyte
specific markers. Moreover, the in vitro differentiated cells were shown
to express and secrete GDNF into the growth medium. GDNF is a protein,
previously been shown to protect, preserve and even restore neurons,
particularly dopaminergic cells in Parkinson's disease, but also neuron
function in other neurodegenerative pathologies such as ALS and
Huntington's. Unfortunately, therapeutic application of GDNF is hampered
by its poor brain penetration and stability. Attempts to directly infuse
the protein directly to the brain is impractical and the alternative,
using GDNF gene therapy, suffers the limitations and risks of using viral
vectors. Our preliminary results show that our GDNF astrocyte-like cells,
when transplanted into Parkinson's disease rats with a 6-OHDA lesion, show
significant efficacy. Within weeks of the transplantation, there was an
improvement of more than 50% in the animals' characteristic disease
symptoms.
We intend to optimize the proprietary processes for transformation of human bone
marrow expanded mesenchymal stem cells into differentiated cells that produce
dopamine and/or GDNF for implantation to PD and ALS patients. The optimization
and process development will be conducted in an effort to comply with FDA
guidelines for Good Tissue Practice (cGTP) and 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,
(separately and in combination). 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 PD and ALS patients.
-19-
Our technology is based on the NurOwnTM products - an autologous cell
therapeutic modality, comprising the extraction of the patient bone marrow,
processed into the appropriate neuronal cells and re-implanted into the
patient's 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:
o bone marrow aspiration from patient;
o isolating and expanding the mesenchymal stem cells;
o differentiating the expanded stem cells into neuronal-like dopamine
producing cells and/or astrocytes-like GDNF producing cells; and
o implantation of the differentiated cells into patient from whom the bone
marrow was extracted
Business strategy
Our efforts are currently focused on the development of the technology from the
lab to the clinic with the main objectives:
o Developing the cell differentiation process according to FDA guidelines;
o Demonstrating safety and efficacy, first in animals and then in patients;
and
o Setting up centralized facilities to provide NurOwnTM 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. We intend to provide
strategic partners with services required to process the NurOwnTM products for
the clinical trials. 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.
Intellectual Property
o The NurOwnTM technology for differentiation of dopamine producing
neuron-like cells is covered by PCT patent application number
PCT/IL03/00972 filed in November 17, 2003.
o A provisional patent application 60/690,879 was filed for the NurOwnTM
technology for differentiation of GDNF producing cells on June 16, 2005.
o A provisional patent application 60/748,219 was filed for covering methods
of generating oligodendrocytes astrocytes from bone marrow stem cells on
December 8, 2005.
o The Company has filed for a trademark on NurOwnTM.
The patent applications, as well as relevant know-how and research results are
licensed from Ramot. BrainStorm intends to work with Ramot to protect and
enhance its intellectual property rights by filing continuations and new patent
applications on any improvements to NurOwnTM 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 our Research and License Agreement (the "Ramot
Agreement") with Ramot, the technology licensing company of Tel Aviv University.
Under the terms of the Ramot Agreement, Ramot granted to us an exclusive license
to (a) 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 (b) the
results of further research to be performed by the same team on the development
of the stem cell technology. 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
are met.
In consideration for the license, we agreed to pay Ramot:
o an up-front license fee payment of $100,000;
o an amount equal to 5% of all Net Sales of Products as those terms are
defined in the Research and License Agreement ; and
-20-
o an amount equal to 30% of all Sublicense Receipts as such term is defined
in the Research and License Agreement.
In addition, we issued to Ramot and its designees, warrants to purchase an
aggregate of 10,606,415 shares of our common stock (29% of our share capital on
a fully diluted basis as of November 4, 2004). Simultaneously with the execution
of the 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 Ramot Agreement.
As of November 4, 2004, we implemented these consulting agreements, under which
we pay each of Professor Melamed and Dr. Offen an annual consulting fee of
$72,000, and we issued each of them warrants to purchase 1,097,215 shares of our
common stock (3% of our issued and outstanding shares on the same terms as the
warrants issued to Ramot). Each of the warrants is exercisable for a five-year
period beginning on November 4, 2005.
In October 2004, we paid Ramot a total of $402,000 to cover the upfront license
fee payment, the first installment of research funding and patent expenses
reimbursement. Ramot has agreed to defer our second, third, fourth, and fifth
research funding payments for the sum of $142,500 each, which were originally
due May 1, 2005, August 1, 2005, November 1, 2005, and February 1, 2006, until
March 1, 2006. In October 2005, we made an $80,000 payment to Ramot to cover
part of these license fees, research funding payments, and patent expenses
reimbursement owed to Ramot. If we fail to make these payments by such time (for
which we will need to obtain additional financing), or to obtain an additional
deferral from Ramot until we raise such capital, and Ramot elects to terminate
our license, we would need to change our business strategy entirely and would be
forced to cease our operations.
Employees
As of December 31, 2005, we had two executive officers, Yoram Drucker, our Chief
Operating Officer, and David Stolick, our Chief Financial Officer. On November
10, 2005, Dr. Yaffa Beck, resigned from her positions as President and CEO and
director of the Company. Mr. Yoram Drucker, our Chief Operating Officer, has
assumed Dr. Beck's responsibilities as principal executive officer effective
immediately and our Board of Directors has initiated a search for a new CEO. We
currently have six scientific and administrative employees. Assuming we
consummate our intended financings, we expect to increase our staff
significantly in the future.
Facilities; Equipment
The address of our principal executive offices is 1350 Avenue of the Americas,
New York, NY 10019, where in consideration for $ US 350 per month we have a
license to use office space and receive general office services until November
30, 2006. On December 1, 2004 our Israeli subsidiary, Brainstorm Cell
Therapeutics Ltd. (the "Subsidiary"), entered into a lease agreement for the
lease of premises in Petach Tikva, Israel, which include approximately 600
square meters of office and laboratory space. The term of the lease is 36
months, with two options to extend same - one for an additional 24 months (the
"First Option"), and one for an additional 36 months (the "Second Option"). Rent
is to be paid on a quarterly basis in the following amounts: (i) NIS 17,965
(approximately $US 3,902) per month during the first 12 months of the lease,
(ii) NIS 19,527 (approximately $US 4,242) per month during the following 24
months of the lease, (iii) NIS 22,317 (approximately $US 4,848) per month during
the First Option period and (iv) NIS 23,712 (approximately $US 5,151) per month
during the Second Option period.
In May 2005 we completed leasehold improvements of the Petach Tikva facility for
which we paid the contractor approximately $US 368,000 and issued it
fully-vested options to purchase 30,000 shares of our common stock at an
exercise price of $US0.75 per share. The lessor has reimbursed $US 82,000 in
connection with these improvements. We relocated to the new facility in May 2005
and, assuming we complete additional financings, we intend to purchase certain
additional laboratory equipment at an estimated cost of $US 150,000.
Plan of Operations
Assuming we can successfully consummate our additional financings, our primary
objectives over the twelve months ending December 31, 2006 will be:
1. To define and optimize our NurOwnTM technology in human bone marrow cells,
so as to enable future processing and manufacturing for clinical studies
in accordance with FDA guidelines. We intend to perfect methods for the
stem cell growth and differentiation in specialized growth medias, as well
as methods for freezing, thawing, transporting and storing the expanded
mesenchymal stem cells, as well as the differentiated cells.
2. To conduct further studies in animal models of Parkinson's disease (mice
and rats) to evaluate the engraftment, survival and efficacy of our cell
implants for our dopamine producing and/or GDNF cells, separately and in
combination.
3. To evaluate and better define the induction of human bone marrow cells to
oligodendrocyes-like cells and to test the efficacy in animal models of
multiple sclerosis.
-21-
4. To develop analytical methodology and specifications to be used as release
criteria in setting up a quality control system for the processing of our
cells.
5. To set up standard and reproducible production procedures.
6. In parallel, to continue to gather information on the efficacy in animal
models.
7. To conduct a full safety study of the final cell product for ALS/PD.
8. To write up clinical protocols for phase 1and 2 clinical studies.
All of these activities will be coordinated with a view towards the execution of
clinical trials of the dopamine- and/or GDNF- producing differentiated cell
implants in humans. We intend to crystallize our development plans with the
assistance of our scientific advisory board members as well as to retain
external regulatory consultants, expert in the FDA cell therapy regulation
guidelines.
We also intend to continue our close cooperation and funding of the research
programs conducted by the scientific team led by Prof. Melamed and Dr. Offen at
the Tel Aviv University. These programs will focus on further understanding and
optimization of the technology towards the generation of better processes for
generation of dopaminergic and other neurons as well as oligodendrocytes, and,
longer-term, to target additional neurodegenerative diseases, such as ALS and
Multiple Sclerosis (MS).
In addition, we intend to identify and evaluate in-licensing opportunities for
development of innovative technologies utilizing cell and gene therapy for
diabetes, cardiac disease and other indications.
Cash requirements
At December 31, 2005, we had $144,480 in total current assets and $728,767 in
total current liabilities and on February 1, 2006, we had approximately $US
39,000 in cash. On December 7, 2005 we raised an additional $ US 135,000 (net of
expenses) in connection with a closing on a private placement of 187,500 units
comprising shares of our common stock and warrants for our common stock at $0.80
per unit. We will need to raise additional funds through public or private debt
or equity financings within the next month to meet our anticipated expenses so
that we can execute our business plan. Although we have been seeking such
additional financings, no commitments to provide additional funds have been made
by management, other shareholders or third parties. We may not be able to raise
additional funds on favorable terms, or at all. If we are unable to obtain
additional funds in a timely manner, we will be unable to execute our business
plan and we will be forced to cease our operations.
In September 2005, we raised an additional $225,000 (net of expenses) in
connection with a closing on a private placement of 312,500 units comprising
shares of our common stock and warrants for our common stock at $0.80 per unit.
In May 2005, we raised $US 149,500 through a private placement of our common
stock at $0.80 per share. In July 2005, we raised $US 99,000 through a private
placement of our common stock at $0.60 per share. Those followed a private
placement in which we raised about $1.4 million that closed in three tranches in
October and November 2004 and February 2005.
In late 2004 and 2005 we began to increase our spending significantly in order
to execute our development programs. In October 2004, we made a $US 402,000
payment to Ramot to cover the up-front license fee, reimbursement of certain
patent expenses and initial research funding obligations under our agreement. We
have also made capital expenditures in the approximate amount of $US 335,000 in
order to build out our laboratory and office facilities to which we relocated in
the end of May 2005.
We are obligated to pay Ramot $US 142,500 on a quarterly basis through April
2006, and, if certain research milestones are met, for an additional two-year
period. Ramot has agreed to defer our second, third, fourth, and fifth research
funding payments for the sum of $US 142,500 each, which were originally due May
1, 2005, August 1, 2005, November 1, 2005, and February 1, 2006 until March 1,
2006. In October 2005, we made an $US 80,000 payment to Ramot to cover part of
these license fees, research funding payments, and patent expenses reimbursement
owed to Ramot. If we fail to make these payments by such time (for which we will
need to consummate additional financings), or to obtain an additional deferral
from Ramot until we raise such capital, and Ramot elects to terminate our
license, we would need to change our business strategy entirely or would be
forced to cease our operations. Our other material cash needs for the next 12
months will include, among others, employee salaries and benefits, facility
lease, capital equipment expenses, legal and audit fees, patent prosecution
fees, consulting fees, payments for outsourcing of certain animal experiments
and possibly, upfront payments for in-licensing opportunities.
Research and Development
Our research and development efforts have focused on development of growth
conditions and tools to evaluate the differentiation of bone marrow stem cells
into neural-like cells, suitable for transplantation as a restorative therapy
for neurodegenerative diseases.
-22-
For the twelve months ending December 31, 2006, we estimate that our research
and development costs will be approximately $US 1,600,000. We intend to spend
our research and development costs on development of our core NurOwn(TM)
technology by developing the cell differentiation process according to FDA
guidelines. We intend to continue to fund our collaborators at the university
lab and in parallel, we have constructed and set up a facility, which includes
laboratories for continued development of our proprietary processes. We also
intend to find and finance collaborations with medical centers for future
clinical trials.
General and Administrative Expenses
If we can successfully complete our financings, for the twelve months ending
December 31, 2006, we estimate that our general and administrative expenses will
be approximately $US 1,000,000. These expenses will include, among others,
salaries, legal and audit expenses, business development, investor and public
relations and office maintenance.
We do not expect to generate any revenues in the twelve-month period ending
December 31, 2006.
In our management's opinion, we need to achieve the following events or
milestones in the next twelve months in order for us to reach clinical trials
for our NurOwn(TM) dopamine or GDNF producing cell differentiation process as
planned within one to two years:
o Raise equity or debt financing or a combination of equity and debt
financing of at least $5,000,000.
o Conduct preclinical studies in rodents Parkinson's model to confirm safety
and efficacy.
o Conduct full safety study of the final cell product for ALS/PD.
o Write up clinical protocols for phase I & II clinical studies.
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.
Risk Factors
Any investment in our common stock involves a high degree of risk. You should
consider carefully the risks described below, together with the other
information contained in this report. If any of the following events actually
occurs, our business, financial condition and results of operations may suffer
materially. As a result, the market price of our common stock could decline, and
you could lose all or part of your investment in our common stock
IN ORDER TO EXECUTE OUR BUSINESS PLAN, WE WILL NEED TO RAISE ADDITIONAL CAPITAL
IN THE COMING MONTH. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL ON FAVORABLE
TERMS AND IN A TIMELY MANNER, WE WILL NOT BE ABLE TO ACHIEVE OUR BUSINESS PLAN,
WE WILL BE FORCED TO RESTRICT OR CEASE OUR OPERATIONS AND YOU COULD LOSE YOUR
INVESTMENT.
We will need to raise additional funds within the coming month 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 that there is substantial doubt regarding our ability to continue as a
going concern. As highlights of our cash position, recent financings and recent
and planned expenditures:
o At December 31, 2005, we had $US 144,480 in total current assets and $US
728,767 in total current liabilities and on February 1, 2006, we had
approximately $US 39,000 in cash.
o In October and November 2004 and February 2005, we raised approximately
$1.4 million in connection with several closings on a private placement.
o On May 12, 2005, we raised an additional $US 149,500 through a private
placement of our common stock at $0.80 per share and in July 27, 2005, we
raised an additional $US 99,000 through a private placement of 165,000
shares of our common stock at $0.60 per share.
o On September 30, 2005, we raised an additional $US 225,000 (net of
expenses) in connection with a closing on a private placement of 312,500
units comprising shares of our common stock and warrants for our common
stock at $0.80 per unit.
o On December 7, 2005, we raised an additional $US 135,000 (net of expenses)
in connection with a closing on a private placement of 187,500 units
comprising shares of our common stock and warrants for our common stock at
$0.80 per unit.
-23-
o In late 2004 and early 2005, we began to increase our spending
significantly to execute our development programs.
o In October 2004, we made a $US 402,000 payment to Ramot to cover the
up-front license fee, reimbursement of certain patent expenses and initial
research funding obligations under our agreement. We are obligated to pay
Ramot $US 142,500 on a quarterly basis through April 2006, and, if certain
research milestones are met, for an additional two-year period. Ramot has
agreed to defer our second, third, fourth and fifth research funding
payments for the sum of $US 142,500 each, which were originally due May 1,
2005, August 1, 2005, November 1, 2005, and February 1, 2006 until March
1, 2006. In October 2005, we made an $US 80,000 payment to Ramot to cover
part of these license fees, research funding payments, and patent expenses
reimbursement owed to Ramot.
o We have also made capital expenditures in the approximate amount of $US
335,000 in order to build out our laboratory and office facilities to
which we relocated in the end of May 2005.
o Our other material cash needs for the next 12 months will include, among
others, employee salaries and benefits, facility lease, capital equipment
expenses, legal and audit fees, patent prosecution fees, and consulting
fees.
o For the twelve months ending December 31, 2006, we estimate that our
research and development costs will be approximately $US 1,600,000 and our
general and administrative expenses will be approximately $US 1,000,000.
We continue to seek additional financings although we have so far been
unsuccessful in our efforts beyond as described above. Even if we complete an
interim or bridge financing we would 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, we will be forced to restrict or cease our operations and you
could lose your investment.
Assuming we raise additional funds through the issuance of equity,
equity-related or convertible debt securities, these securities may have rights,
preferences or privileges (including registration rights) senior to those of the
rights of our common stock and our stockholders will experience additional
dilution. If we raise capital on such terms, in the event of a bankruptcy,
shareholders could lose their entire investments as a result of any such senior
preferences or privileges.
WE FACE CERTAIN RISKS DUE TO THE RECENT RESIGNATION OF OUR PRESIDENT AND CHIEF
EXECUTIVE OFFICER. IF WE FAIL TO REPLACE HER IN A TIMELY MANNER, OUR BUSINESS
COULD BE NEGATIVELY IMPACTED AND WE MAY FAIL TO ACHIEVE OUR GOALS.
As a small company engaged, at this stage, in research and development, our
success depends greatly on our personnel, especially our senior management. Our
President and Chief Executive Officer, Dr. Yaffa Beck, resigned from her
positions as an officer and director of the Company on November 10, 2005. Mr.
Yoram Drucker, the Company's Chief Operating Officer, has assumed Dr. Beck's
responsibilities as the Registrant's principal executive officer effective
immediately and our Board of Directors has initiated a search for a new CEO. If
we fail to find a new CEO in a timely manner, our business could be negatively
impacted and we may fail to achieve our goals.
Assuming we move successfully through this transition, in the future, the
success of our company will continue to depend largely upon our ability to
successfully attract and maintain competent and qualified key management and
scientific personnel. As with any startup company, there can be no guarantee
that we will be able to attract such individuals or that the presence of such
individuals will necessarily translate into profitability for our company. Our
inability to attract and retain key personnel may materially and adversely
affect our business operations.
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 PAY THE REQUIRED RESEARCH FUNDING OR ROYALTIES, WE WOULD NEED TO
CHANGE OUR BUSINESS STRATEGY AND WE WILL BE FORCED TO CEASE OUR OPERATIONS.
Our Research and License Agreement with Ramot imposes on us development and
commercialization obligations, milestone and royalty payment obligations and
other obligations. In October 2004, we made payments to Ramot to cover the
up-front license fee, reimbursement of certain patent expenses and initial
research funding. Beginning May 1, 2005 we are obligated to pay Ramot $142,500
on a quarterly basis through April 2006, and, if certain research milestones are
met, for an additional two-year period. If we fail to comply with these
obligations to Ramot, Ramot may have the right to terminate the license. Ramot
has agreed to defer our second, third, fourth and fifth research funding
payments for the sum of $142,500 each, which were originally due May 1, 2005,
August 1, 2005, November 1, 2005, and February 1, 2006 until March 1, 2006. In
October 2005, we made an $80,000 payment to Ramot to cover part of these license
fees, research-funding payments, and patent expenses reimbursement owed to
Ramot. If we fail to make these payments by such time (for which we will need to
obtain additional financing), or to obtain an additional deferral from Ramot
until we raise such capital, and Ramot elects to terminate our license, we would
need to change our business strategy and we will be forced to cease operations.
-24-
WE HAVE A LIMITED OPERATING HISTORY, WHICH WILL LIMIT YOUR ABILITY TO EVALUATE
OUR OPERATIONS AND PROSPECTS.
We were incorporated under the laws of the State of Washington on September 22,
2000, but only changed our business model to focus on stem cell research in
connection with the signing of the Research and License Agreement with Ramot in
July 2004. We have a limited operating history upon which you may evaluate our
operations and prospects. Our limited operating history makes it difficult to
evaluate our commercial viability. Our potential success should be evaluated in
light of the problems, expenses and difficulties frequently encountered by new
businesses in general and biotechnology businesses specifically.
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 March 31, 2004 or March 31, 2005
or for any interim period since then. As a development stage company, we are at
the earliest 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.
STEM CELL THERAPY IS NEW AND OUR DEVELOPMENT EFFORTS MAY NOT YIELD AN EFFECTIVE
TREATMENT OF HUMAN DISEASES.
The field of stem cell therapy is new and, except for bone marrow transplants
for neoplastic disease, it remains largely untested in the clinical setting. Our
intended cell therapeutic treatment methods for PD and ALS involve a new
approach that has never proven to work in human testing. We are still conducting
experimental testing in animals for our treatment, 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 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 United States 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.
Testing is necessary to determine safety and efficacy before a submission may be
filed with the FDA to obtain authorization to market regulated products. In
addition, the FDA imposes various requirements on manufacturers and sellers of
products under its jurisdiction, such as labeling, Good Manufacturing Practices,
record keeping and reporting requirements. The FDA also may require
post-marketing testing and surveillance programs to monitor a product's effects.
Furthermore, changes in existing regulations or the adoption of new regulations
could prevent us from obtaining, or affect the timing of, future regulatory
approvals or could negatively affect the marketing of our existing products.
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:
o we may not be successful in obtaining the approval to perform clinical
studies, an investigational new drug application, or IND, with respect to
a proposed product;
o preclinical or clinical trials may not demonstrate the safety and efficacy
of proposed products satisfactory to the FDA or foreign regulatory
authorities; or
o 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).
-25-
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 NurOwnTM 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 ANY COMPANY WITH WHICH WE ENTER INTO COLLABORATIONS TO
CONDUCT CLINICAL TRIALS AND TO COMMERICALIZE 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
PARKINSON'S DISEASE 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 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, which 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. All of these factors put us at a competitive
disadvantage.
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 with the Israeli Patent
Office and the license granted to us by Ramot under the Research and License
Agreement. We have agreed with Ramot in the Research and License Agreement to
seek comprehensive patent protection for all inventions licensed to us under the
Research and License 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 such relationships 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.
-26-
THE PRICE OF OUR STOCK IS EXPECTED TO BE HIGHLY VOLATILE.
The market price of our common stock has fluctuated significantly in the short
time it has been traded, 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
AND BY OPTIONS, WARRANTS OR SHARES WE GRANT TO MANAGEMENT, EMPLOYEES, DIRECTORS
AND CONSULTANTS.
In order to meet our financing needs described above, we intend to initiate a
significantly larger offering of units comprising Common Shares and warrants for
Common Shares (the "Subsequent Offering"). The precise terms of the Subsequent
Offering will be determined by the Company and potential investors. Assuming the
Subsequent Offering is successfully consummated, it will have a significant
dilutive effect on your percentage ownership in the Company.
In addition, in anticipation of hiring new management members and employees,
recruiting new directors and retaining additional advisors and consultants, in
November 2004 and February 2005, our Board of Directors approved our 2004 Global
Share Option Plan and the 2005 U.S. Stock Option Plan and Incentive Plan (the
"Global Plan" and "U.S. Plan" respectively and the "Plans" together),
respectively, and further approved the reservation of 9,143,462 shares of the
Company's common stock for issuance thereunder. The Company's shareholders
approved the Plans and the shares reserved for issuance thereunder in a special
meeting of shareholders that was held on March 28, 2005. We have made and intend
to make further option grants under our stock option and incentive plans or
otherwise issue warrants or shares of our common stock to such individuals. For
example:
o under our Global Plan, we have granted a total of 4,053,115 options with
various exercise prices and expiration dates, to officers, services
providers, consultants, and employees.
o under our U.S. Plan we have issued an additional 750,000 shares of
restricted stock for grants to Scientific Advisory Board members,
consultants and directors.
Such issuances will, if and when made (and if options or warrants are
subsequently exercised), dilute your percentage ownership in the company.
ACTUAL OR PERCEIVED SUBSTANTIAL SALES OF SHARES OF OUR COMMON STOCK THAT ARE
CURRENTLY AND MAY IN THE FUTURE BE SUBJECT TO REGISTRATION RIGHTS OR THAT MAY BE
SOLD PURSUANT TO EXEMPTIONS FROM REGISTRATION REQUIREMENTS COULD RESULT IN A
SIGNIFICANT DECLINE IN OUR STOCK PRICE.
On July 8, 2005, lockup agreements that we had entered into with (a) 29
shareholders with respect to 15,290,000 shares of our common stock held by them,
and (b) holders of warrants to purchase 12,800,844 shares of our common stock,
expired with respect to fifteen percent (15%) of these securities. The lockup
agreements remain in place with respect to the remaining eighty-five percent
(85%) of the securities until July 8, 2006.
An additional 1,894,808 shares of our common stock were issued in private
placements in late October and early November 2004 and in February 2005 (each
share accompanied by a warrant to purchase one share of our common stock at an
exercise price of $1.50 per share, which warrant is exercisable for a one-year
period from the date of issuance, and a warrant to purchase one share of our
common stock at an exercise price of $2.50 per share, which warrant is
exercisable for a three-year period from the date of issuance. The shares of
common stock will be eligible for sale in the public markets pursuant to Rule
144 later this year and in early 2006 and also have "piggy back" registration
rights, subject to underwriter discretion, to be included by the Company in a
registration statement filed with the Securities and Exchange Commission.
In May 2005, we issued 186,875 shares at $0.80 per share pursuant to a private
placement and in July 2005 we issued an additional 165,000 shares at $0.60 per
share pursuant to a private placement. We are seeking additional financings
through a contemplated subsequent financing described above that would likely
include the granting of demand registration rights.
-27-
On September 30, 2005, we issued 312,500 shares of our common stock at $0.80 per
share pursuant to a first closing under the offering of up to 1,250,000 shares
(the "Offering") (each share accompanied by a warrant to purchase one share of
our common stock at an exercise price of $1.00 per share, which warrant is
exercisable for a three-year period from the date of issuance). We have agreed
to file a Registration Statement on Form SB-2 (or an alternative available form
if we are not eligible to file a Form SB-2) covering the above shares no later
than forty five (45) days after the final closing under the Offering and will
use our reasonable best efforts to cause such Registration Statement to be
declared effective within ninety (90) days thereafter. In the event the
Registration Statement has not been declared effective within 135 days of such
closing of the Offering, we are obligated to pay the buyers of the above shares
liquidated damages equal to 1.0% of the amount invested for each subsequent
30-day period until such Registration Statement is declared effective.
On December 7, 2005 we issued 187,500 shares of our common stock at $0.80 per
share pursuant to a second closing under the Offering (each share accompanied by
a warrant to purchase one share of our common stock at an exercise price of $
1.00 per share, which warrant is exercisable for a three-year period from the
date of issuance). The above shares have the same registration rights as the
shares issued under the first closing of the Offering.
We also issued the following warrants effective the fourth quarter of 2004: (i)
to Ramot and its designees, Dr. Daniel Offen, Professor Eldad Melamed, Pnina
Green, and Mr. Yosef Levy, warrants to purchase, in the aggregate, 10,606,415
shares of our common stock at a purchase price of $0.01 per share; (ii) to each
of our consultants, Dr. Daniel Offen and Professor Eldad Melamed, warrants to
purchase 1,097,215 shares of our common stock at a purchase price of $0.01 per
share. We have agreed to register the shares underlying these warrants (whether
by demand, piggy back registration or otherwise) by no later than twenty-one
(21) months from July 8, 2004 (the execution date of our License Agreement with
Ramot) and agreed to maintain the effectiveness of a registration statement
covering such shares until the earlier of (i) the time at which, in the opinion
of counsel to the Company, all of the shares underlying the warrant then held by
the Holder could be sold in any 90 day period pursuant to Rule 144 under the
Securities Act or (ii) the expiration date of the warrant. These registration
rights shall be set forth fully in a separate registration rights agreement to
be entered into between us and the holders which agreement shall include
customary provisions regarding, inter alia, deferrals, cutbacks, lockups and
indemnification by the Company of the Holder. We also issued (i) two warrants in
December 2004 to two different consultants to purchase respectively 1,350,000
and 450,000 shares of our common stock, which warrants have certain piggy back
registration rights (ii) a warrant in May 2005 to purchase 47,500 shares of our
common stock as a retainer to the placement agent, which warrant has certain
piggy back registration rights and (iii) 50,000 shares of common stock to
consultants in consideration for EDGAR filing services, which shares have
certain piggy-back registration rights.
Finally, we expect to register the shares subject to our Global Plan and U.S.
Plan pursuant to a Form S-8 registration statement in the coming future, and
have agreed to register the shares underlying Dr. Beck's, Mr. Drucker's and Mr.
Stolick's options on such a Form S-8 registration statement; provided that this
obligation shall not take effect until the one year anniversary of the grant of
the options.
When we register the shares or those underlying these convertible securities
referred to above for which we have undertaken to register, they can be sold in
the public market. In addition, the shares that we will not register will become
eligible for sale into the public market subject to and in accordance with
applicable SEC rules and regulations, which provide exemptions from registration
requirements. As these registrations are effected or restrictions on resale end,
if any of the holders of these shares or convertible securities, or any other of
our existing stockholders, sell a large number of shares of our common stock, or
the public market perceives that existing stockholders might sell shares of
common stock, the market price of our common stock could decline significantly.
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
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.
YOU MAY EXPERIENCE DIFFICULTIES IN ATTEMPTING TO ENFORCE LIABILITIES BASED UPON
U.S. FEDERAL SECURITIES LAWS AGAINST U.S. 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 United States. Our Chief Operating
Officer, Chief Financial Officer and some of our directors are foreign citizens
and do not reside in the United States. It may be difficult for courts in the
United States 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 United States
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 bring lawsuits or, if successful, collecting judgments
against these persons or entities as opposed to domestic persons or entities.
-28-
POLITICAL, ECONOMIC AND MILITARY INSTABILITY IN ISRAEL MAY IMPEDE OUR ABILITY TO
EXECUTE OUR PLAN OF OPERATIONS.
Our principal offices and the research and development facilities of the
scientific team funded by us under the Ramot Agreement are located in Israel.
Accordingly, political, economic and military conditions in Israel may affect
directly 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 has 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.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of its Principal
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, the Principal Executive Officer and the Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in the reports
filed by it under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and include controls and procedures designed to
ensure that information required to be disclosed by the Company in such reports
is accumulated and communicated to the Company's management, including the
Principal Executive Officer and Chief Financial Officer of the Company, as
appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control.
There were no changes in the Company's internal control over financial reporting
that occurred during the quarter ended December 31, 2005 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. Litigation is
subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business. We are currently
not aware of any such legal proceedings that we believe will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 2, 2006, the Company entered into an agreement with Princeton
Research, Inc. ("PRI") pursuant to which in consideration for the services
provided by PRI, the Company will issue PRI 150,000 shares of restricted stock
at a purchase price equal to a par value of $0.00005 each, which shares shall be
subject to the Company's right to repurchase such shares at the Purchase Price
in the event PRI breaches its obligations or in the event the agreement is
terminated for any reason. Such repurchase right shall expire twelve (12) months
from the date thereof.
On January 4, 2006, the Company entered into an agreement with Friedland
Corporate Investor Services LLC ("Friedland") pursuant to which in consideration
for the services provided by Friedland, the Company will issue Friedland 200,000
shares of restricted stock at a purchase price equal to a par value of $0.00005
each ("Purchase Price"), which shares shall be subject to the Company's right to
repurchase such shares at the Purchase Price in the event Friedland breaches its
obligations or in the event the agreement is terminated for any reason. Such
repurchase right shall expire twelve (12) months from the date thereof. In
addition to the above shares, Friedland will also be granted options to purchase
230,00 shares of the Company's common stock at a price per share of $0.65, which
options shall be issued under the US Plan and shall vest in three (3) equal
annual installments commencing on the date thereof and shall be exercisable
during a period of ten (10) years.
On January 8, 2006, the Company entered into an agreement with Daronet Ltd.
("Daronet") pursuant to which in consideration for the services provided by
Daronet, the Company will grant Daronet options to purchase 8,000 shares of the
Company's common stock at a price per share of $0.15, which options shall be
issued under the Global Plan and shall vest over a period of twelve (12) months
commencing on the date thereof and shall be exercisable during a period of five
(5) years.
-29-
On December 14, 2005, the Company granted Rainbow Biotechnologies Sarl options
to purchase 457,163 shares of the Company's common stock at a price per share of
$0.70, which options were issued under the Global Plan and shall vest over a
period of three (3) months commencing on the date of the grant and shall be
exercisable during a period of ten (10) years.
On December 14, 2005, the Company granted Arttic Israel-Halevy Dweck Ltd.
fully-vested options to purchase 20,000 shares of the Company's common stock at
a price per share of $ 0.15, which options were issued under the Global Plan and
shall be exercisable during a period of three (3) years.
None of these transactions involved any underwriters, underwriting discounts or
commissions and we believe that such transactions were exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder.
ITEM 6. EXHIBITS
10.1 Form of December 2005 Subscription Agreement (incorporated by reference to
Exhibit 10.21 of the Registrant's Current Report on Form 8-K dated
December 7, 2005).
10.2 Form of Warrant to purchase common stock for $1.00 per share (incorporated
by reference to Exhibit 4.10 of the Registrant's Current Report on Form
8-K dated December 7, 2005).
31.1 Certification of the Principal Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Principal Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Principal Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
-30-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BRAINSTORM CELL THERAPEUTICS INC.
Dated: February 6, 2006
By: /s/ Yoram Drucker
-----------------------------------
Name: Yoram Drucker
Title: Chief Operating Officer
(Principal Executive Officer)
Dated: February 6, 2006
By: /s/ David Stolick
-----------------------------------
Name: David Stolick
Title: Chief Financial Officer
(Principal Financial Officer)
-31-