UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934
FOR THE YEAR ENDED MARCH 31, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________.
COMMISSION FILE NUMBER 333-61610
BRAINSTORM CELL THERAPEUTICS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GOLDEN HAND RESOURCES INC.
(FORMER NAME OF REGISTRANT)
WASHINGTON 91-2061053
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1350 Avenue of the Americas
New York, NY 10019
212-557-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes |X|
No |_|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB |_|.
The issuer's total revenues for the year ended March 31, 2005, were $0.
As of May 11, 2005, the aggregate market value of the voting common equity held
by non-affiliates of the registrant was $24,908,491, based on the closing price
of $1.60 as reported on the OTC BB operated by the NASD. Shares of common stock
held by each officer and director and by each person who owns ten percent or
more of the outstanding common stock have been excluded from this calculation as
such persons may be considered to be affiliated with the registrant.
At May 11, 2004, the number of shares outstanding of the Registrant's Common
Stock, $0.00005 par value, was 20,867,808.
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format (Check one): Yes |_|; No |X|.
PART I
Item 1. Description of Business.
Forward Looking Statements
This annual report contains numerous statements, descriptions, forecasts and
projections, regarding Brainstorm Cell Therapeutics Inc. and its potential
future business operations and performance. These statements, descriptions,
forecasts and projections constitute "forward-looking statements," and as such
involve known and unknown risks, uncertainties, and other factors that may cause
our actual results, levels of activity, performance and achievements to be
materially different from any results, levels of activity, performance and
achievements expressed or implied by any such "forward-looking statements". Some
of these are described in the "risk factors" section of this annual report. In
some cases you can identify such "forward-looking statements" by the use of
works like "may," "will," "should," "could," "expects," "hopes," "anticipates,"
"believes," "intends," "plans," "estimates," "predicts," "likely," "potential,"
or "continue" or the negative of any of these terms or similar words. These
"forward-looking statements" are based on certain assumptions that we have made
as of the date hereof. To the extent these assumptions are not valid, the
associated "forward-looking statements" and projections will not be correct.
Although we believe that the expectations reflected in these "forward-looking
statements" are reasonable, we cannot guarantee any future results, levels of
activity, performance or achievements. It is routine for our internal
projections and expectations to change as the year or each quarter in the year
progresses, and therefore it should be clearly understood that the internal
projections and beliefs upon which we base our expectations may change prior to
the end of each quarter or the year. Although these expectations may change, we
may not inform you if they do and we undertake no obligation to do so. We
caution investors that our business and financial performance are subject to
substantial risks and uncertainties. In evaluating our business, prospective
investors should carefully consider the information set forth under the caption
"Risk Factors" in addition to the other information set forth herein and
elsewhere in our other public filings with the Securities and Exchange
Commission.
Company Overview
BrainStorm Cell Therapeutics Inc. ("Brainstorm", the "Company", or "we") is an
emerging company developing stem cell therapeutic products based on breakthrough
technologies enabling the in vitro differentiation of bone marrow stem cells to
neural-like cells. We aim to become a leader in adult stem cell transplantation
for neurodegenerative diseases. Our focus is on utilizing the patients own bone
marrow stem cells to generate neuron-like cells that may provide an effective
treatment initially for Parkinson's Disease (PD), and thereafter for Multiple
Sclerosis and other neurodegenerative disorders.
Our core technology, NurOwn(TM), was developed through a collaboration between
prominent neurologist, Prof Eldad Melamed, Head of Neurology of the Rabin
Medical Center and member of the Scientific Committee of Michael J. Fox
Foundation for Parkinson's Research and expert cell biologist Dr. Daniel Offen,
at the Felsenstein Medical Research Center of Tel-Aviv University.
This scientific team is among the first to have successfully demonstrated
release of dopamine from in vitro differentiated bone marrow cells. Moreover, in
research conducted by this team, implantation of these differentiated cells into
brains of animal models that had been induced to Parkinsonian behaviour markedly
improved their symptoms. We intend to apply the patent-pending technology to the
development of innovative autologous cell therapeutic products, NurOwn(TM), for
treatment of neurological diseases.
BrainStorm holds exclusive worldwide rights to commercialize the NurOwn(TM)
technology, through a licensing agreement with Ramot at Tel Aviv University Ltd.
("Ramot"), the technology transfer company of Tel Aviv University (further
described below). The agreement also provides for further research, funded by
BrainStorm, to be performed by Prof. Melamed, Dr. Offen and members of their
research team at the Felsenstein Medical Research Center. The results of this
research are licensed to us under the terms of the license agreement. Thus,
although a development stage company, we have access to the research results of
an R&D team comprising about 12 experts in the technology, including molecular
and cell biologists, pharmacologists and animal model experts.
We are currently only in the developmental stage of our technology and product
and we have not yet begun the process of seeking regulatory approval from
regulatory agencies. Our efforts are directed at the development of the
technology from the lab to the clinic with the main objectives:
o Developing the cell differentiation process according to Food and
Drug Administration (FDA) guidelines.
o Demonstrating safety and efficacy first in animals and then in
patients.
o Setting up centralized facilities to provide NurOwn(TM) therapeutic
products and services for transplantation in patients.
We intend to enter into strategic partnerships as we progress towards advanced
clinical development and commercialization.
History
The Company was incorporated under the laws of the State of Washington on
September 22, 2000, under the name Wizbang Technologies, Inc. and acquired the
right to market and sell a digital data recorder product line in certain states
in the U.S. Subsequently the Company changed its name to Golden Hand Resources
Inc.. On July 8, 2004, the Company entered into the licensing agreement with
Ramot to acquire certain stem cell technology and decided to discontinue all
activities related to the sales of digital data recorder product. On November
22, 2004, the Company changed its name from Golden Hand Resources Inc. to
Brainstorm Cell Therapeutics Inc. to better reflect its new line of business in
development of novel cell therapies for neurodegenerative diseases. On October
25, 2004, the Company opened its wholly-owned subsidiary, BrainStorm Cell
Therapeutics Ltd. in Israel.
Stem Cell Therapy
Our activities are within the overall stem cell therapy market. 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 day old
embryo, and adult stem cells, sourced from bone arrow, cord blood and various
organs. Although embryonic stem cells are the easiest to grow and differentiate,
their use in human therapy 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 controversy. 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. Stem
cells have been used successfully in bone marrow transplants for many years,
primarily for treating leukemia, immune deficiency diseases, severe blood cell
diseases, lymphoma and multiple myeloma. Thus, we believe bone marrow presents a
preferable source of stem cells, capable of in vitro growth and multipotential
differentiation. 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 rejection and
other immunological mismatch risks, as well as avoiding the need for
immunosuppressive therapy.
Neurodegenerative Diseases
Studies of neurodegenerative diseases suggest that symptoms that arise in
afflicted individuals are secondary to defects in neuron cell function and
neural circuitry and, to date, cannot be treated effectively with systemic drug
delivery. Consequently, alternative approaches for treating neurodegenerative
diseases have been attempted, such as transplantation of cells capable of
replacing or supplementing the function of damaged neurons. For such cell
replacement therapy to work, implanted cells must survive and integrate, both
functionally and structurally, within the damaged tissue.
Parkinson's Disease
Background
PD is a chronic, progressive disorder, affecting certain nerve cells in the
brain that produce dopamine, a neurotransmitter in a part of the brain that
directs and controls movement. In PD, these dopamine-producing nerve cells break
down, causing dopamine levels to drop and 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 U.S. alone. The numbers are increasing in line with the
general ageing of the population. In over 85% of cases PD occurs in people over
the age of 65. 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 costs
including medical treatment, caring, facilities and other services as well as
loss of productivity of both patients and caregivers, which has been estimated
by the National Institute of Neurological Disease (NINDS) to exceed $26 billion
each year.
Description
The classic symptoms of Parkinson's disease 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.
Current Treatments
Current drug therapy for PD comprises of dopamine replacement, either directly
(levodopa), with dopamine mimetics or by inhibition of its breakdown. Thus, the
current drugs focus on treating the symptoms of the disease and do not presume
to provide a cure.
Levodopa, which remains the standard and most potent PD medication available,
has a propensity to cause serious motor response complications (MRCs) with
long-term use. Moreover, effective drug dosage often requires gradual increase,
leading to more adverse side effects and eventual `resistance' to their
therapeutic action. This greatly limits patient benefit. Therefore, physicians
and researchers are continuously seeking levodopa-sparing strategies in patients
with early-stage disease to delay the need for levodopa, as well as in patients
with late stage disease who no longer respond to therapy.
Prescription drugs to treat PD currently generate sales of over $1 billion and
the market is expected to grow to approximately $2.3 billion by 2010, driven by
the increase in size of the elderly population and the introduction of new PD
therapies that carry higher price tags.
There is a greatly unsatisfied need for novel approaches towards management of
PD. These include neuroprotection and/or neurorestoration, controlling
levodopa-induced adverse side effects, 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.
New therapies under development include novel dopamine agonists and other
compounds targeting nondopaminergic systems (e.g., glutamate antagonists) and
neurotrophic factor therapies that may offer neuroprotection and/or
neurorestoration. In addition, there is an intense effort to develop cell
therapeutic "curative" approaches to restore the neural function in patients
with PD, by replacing the dysfunctional cells with healthy, dopamine producing,
cell transplant.
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 greatly limited by the ethical issues influencing the
availability of human fetuses. Therefore, there are intensive efforts to define
and develop appropriate cells from stem cells.
Brainstorm's Technology
Our approach is based on the processing and differentiation of human mesenchymal
stem cells, present in adult bone marrow, into functional neural-like cells.
Bone marrow harbors stem cells capable of differentiation into both hemopoeitic
(blood and lymph) and mesenchymal (muscle, bone, fat, brain and other) tissues.
Our aim is to "replace" damaged nerve cells and restore function by augmentation
with healthy cells provided by stem cell derived transplants.
The research team led by Prof. Melamed and Dr. Offen has achieved
differentiation of bone marrow mesenchymal stem cells into neuronal-like cells
with typical morphology, electrophysiology and neuron specific markers.
Moreover, the in vitro differentiated cells produce and release dopamine.
Further research conducted by this team in Parkinson's models, showed that upon
implantation in the animals' brains, the cells show long term engraftment,
survival and function, as measured by presence of dopamine production enzymes.
Most importantly, the implantation of these cells into the brains of mice and
rats induced to Parkinsonian behaviour markedly improved their symptoms.
We intend to optimize this proprietary process for generation of neuron-like
human bone marrow derived cells that produce dopamine in a controlled manner for
implantation to PD patients. The optimization and process development will be
conducted in an effort to adhere strictly to FDA guidelines for Good Tissue
Practice (GTP) and Good Manufacturing Practice (GMP). Once the optimization
process is complete, we intend to evaluate the safety and efficacy of cell
transplants in animal models, according to regulatory guidelines. Based on our
results in animals we intend to produce the cells in accordance with GMP and to
conduct clinical trials to assess safety and efficacy of the cell therapy in
humans. In an attempt to increase patient safety and minimize any chance of
rejection or immune reaction, we intend to develop NurOwnTM, as an autologous
cell therapeutic modality, comprising extracted bone marrow, processed into the
appropriate neuronal cells and re-implanted into the patient's brain.
We believe that the therapeutic modality will comprise the following:
o Extracting the bone marrow from patient
o Expanding the mesenchymal stem cells
o Differentiating the expanded stem cells into neuronal-like cells
that produce dopamine
o Implantation of the differentiated cells into same patient
Business Model
Our objective is to have the proprietary procedure adopted by an expanding user
base of hospitals, throughout the United States and Europe, for the treatment of
PD, and later MS. Our intended procedure for the replacement of the degenerated
dopaminergic neurons with healthy functional dopaminergic cells derived by
differentiation of bone marrow, may be among the earliest successes of stem cell
technologies and will be the starting point for a massive market potential in
the area of autologous transplantation. A central laboratory would be
responsible for processing bone marrow extracted from patients, enabling the
production of the cells required for the transplantation. Transplantation would
be carried out by the medical center, with revenues shared with us on an agreed
basis.
We will consider seeking cooperation with a major strategic marketing partner,
having established distribution channels and the ability to gain relatively fast
access to the target markets.
Working with a major partner will optimize our approach. We believe there is a
substantial market opportunity and cooperation with a strategic partner would
facilitate a more rapid and broad market penetration, by leveraging the
partner's market credibility and the proven ability to provide service and
support across a large and geographically spread target market.
Potential strategic partners include:
o Private Hospital Chains - interested in expanding their service
offerings and being associated with an innovative technology,
thereby enhancing their professional standing and revenue potential.
o Major Pharmaceutical and/or Medical Device Companies - seeking new
product opportunities and/or wishing to maintain interest in the
market, which may shift away from drugs towards surgical treatment.
We cannot assure you that we will succeed in finding strategic partners that are
willing to enter into collaborations for our potential products at the
appropriate stage of development, on economic terms that are attractive to us or
at all.
Intellectual Property
The NurOwnTM technology is covered by a PCT patent application filed in November
2003 and published in June 2004 and 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 at Tel Aviv University Ltd. ("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 performedby the same team on the development of the stem cell technology.
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.
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:
- an up front license fee payment of $100,000;
- an amount equal to 5% of all Net Sales of Products as those terms
are defined in the Research and License Agreement ; and
- an amount equal to all 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 issued and
outstanding shares as of November 4, 2004).
As of November 4, 2004, we implemented our consulting agreements with Professor
Melamed and Dr. Offen, under which we pay each of them 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.
Government Regulations and Supervision
Once fully developed, we intend to market our bone marrow derived differentiated
neural-like cell products, NurOwnTM, for transplantation in patients by
neurosurgeons in medical facilities in the United States, Europe, Japan and the
Pacific rim. Accordingly, we believe our research and development activities and
the manufacturing and marketing of our technology are subject to the laws and
regulations of governmental authorities in the United States and other countries
in which our technology and products will be marketed. Specifically, in the
United States, the Food and Drug Administration (FDA), among other agencies,
regulates new biological product approvals (BLA) to establish safety and
efficacy, as well as appropriate production of these products. Governments in
other countries have similar requirements for testing and marketing.
As we are currently only in the developmental stage of our technology and
NurOwnTM cell product, we have not yet begun the process of seeking regulatory
approval from the FDA or other regulatory agencies. We intend to retain expert
regulatory consultants to assist us in our approach to the FDA in our efforts to
achieve regulatory approval.
Regulatory Process in the United States
Regulatory approval of new biological products is a lengthy procedure leading
from development of a new product through pre-clinical animal testing and
clinical studies in humans. This process takes a number of years, is regulated
by the FDA and requires the expenditure of significant resources. There can be
no assurance that our technology will ultimately receive regulatory approval. We
summarize below our understanding of the regulatory approval requirements that
may be applicable to us if we begin the process of seeking an approval from the
Food and Drug Administration.
The Federal Food, Drug, and Cosmetic Act and other Federal statutes and
regulations govern or influence the research, testing, manufacture, safety,
labeling, storage, record-keeping, approval, distribution, use, reporting,
advertising and promotion of our future products. Non-compliance with applicable
requirements can result in civil penalties, recall, injunction or seizure of
products, refusal of the government to approve or clear product approval
applications or to allow us to enter into government supply contracts,
withdrawal of previously approved applications and criminal prosecution.
The FDA has developed and is continuously updating the requirements with respect
to cell and gene therapy products and has issued documents concerning the
regulation of cellular and tissue-based products, as new biological products. In
order to file for a BLA, we will be required to develop our stem cell product in
accordance with the regulatory guidelines for cell therapy and manufacture the
cell products under GMP. GMP, or Good Manufacturing Practice, is a standard set
of guidelines for pharmaceutical and bio-pharmaceutical production operations
and facilities by the FDA and other health regulatory authorities, which apply
caution in allowing any biologically active material to be administered into the
human body.
Although there can be no assurance that the FDA will not choose to change its
regulations, current regulation proposes that cell products which are
manipulated, allogeneic, or as in our case, autologous but intended for a
different purpose than the natural source cells (NurOwnTM are bone marrow
derived and are intended for brain transplantation) must be regulated through a
"tiered approach intended to regulate human cellular and tissue based products
only to the extent necessary to protect public health". Thus the FDA requires:
(i) preclinical laboratory and animal testing; (ii) submission of an
Investigational New Drug (IND) exemption which must be effective prior to the
initiation of human clinical studies; (iii) adequate and well-controlled
clinical trials to establish the safety and efficacy of the product for its
intended use; (iv) submission to the FDA of a BLA; and (v) review and approval
of the BLA as well as inspections of the manufacturing facility for GMP
compliance, prior to commercial marketing of the product.
Generally, in seeking an approval from the FDA for sale of a new medical
product, an applicant must submit proof of safety and efficacy. Such proof
entails extensive pre-clinical studies in the lab and in animals and, if
approved by the agency, in humans. The testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and
may take several years to complete. There can be no assurance that the FDA will
act favorably or in a timely manner in reviewing submitted applications, and an
applicant may encounter significant difficulties or costs in its efforts to
obtain FDA approvals. This, in turn, could delay or preclude the applicant from
marketing any products it may develop. The FDA may also require post-marketing
testing and surveillance of approved products, or place other conditions on the
approvals. These requirements could cause it to be more difficult or expensive
to sell the products, and could therefore restrict the commercial applications
of such products. Product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following initial
marketing. For patented technologies, delays imposed by the governmental
approval process may materially reduce the period during which an applicant will
have the exclusive right to exploit such technologies.
In order to conduct clinical trials of the proposed product, the manufacturer or
distributor of the product will have to file an IND submission with the FDA for
its approval to commencing human clinical trials. The submission must be
supported by data, typically including the results of pre-clinical and
laboratory testing. Following submission of the IND, the FDA has 30 days to
review the application and raise safety and other clinical trial issues. If an
applicant is not notified of objections within that period, clinical trials may
be initiated at a specified number of investigational sites with the number of
patients, as applied. Clinical trials which are to be conducted in accordance
with good clinical practice (GCP) guidelines are typically conducted in three
sequential phases. Phase I represents the initial administration of the drug or
biologic to a small group of humans, either healthy volunteers or patients, to
test for safety and other relevant factors. Phase II involves studies in a small
number of patients to explore the efficacy of the product, to ascertain dose
tolerance and the optimal dose range and to gather additional data relating to
safety and potential adverse affects. Once an investigational drug is found to
have some efficacy and an acceptable safety profile in the targeted patient
population, multi-center Phase III studies are initiated to establish safety and
efficacy in an expanded patient population and multiple clinical study sites.
The FDA reviews both the clinical plans and the results of the trials and may
request an applicant to discontinue the trials at any time if there are
significant safety issues.
In addition, the manufacturing of our cell therapy, whether it is performed by
us or by a contract manufacturer, will be required to be registered as a
biologic product manufacturer with the FDA product approval process. The FDA
will inspect us on a routine basis for compliance with the GMP and Good Tissue
Practice (GTP) guidelines for cell therapy products. The regulations of the FDA
would require that we, and any contract manufacturer, design, manufacture and
service products and maintain documents in the prescribed manner with respect to
manufacturing, testing, distribution, storage, design control and service
activities. The FDA may prohibit a company from promoting an approved product
for unapproved applications and reviews product labelling for accuracy.
Competition
We face significant competition in our efforts to develop our products and
services: (i) cell therapies competing with NurOwnTM and its applications and
(ii) other treatments or procedures to cure or slow the effects of PD and other
neurodegenerative diseases. There are a number of companies developing cell
therapies. Among them, are companies that are involved in the controversial
fetal cell transplant or ESC-derived cell therapy, as well as companies
developing adult stem cells. Other companies are developing traditional chemical
compounds, new biological drugs, cloned human proteins and other treatments,
which are likely to impact the markets, which we intend to target. We believe
that as an autologous bone marrow derived product that has shown proof of
concept in vitro and in animal studies, NurOwnTM has a first mover advantage in
the adult stem cell space and that such space has competitive advantages over
the fetal cell or ESC-derived cell space as it has a long safety record and does
not have the same ethical limitations
Employees
As of May 25, 2005, we have three executive officers, Dr. Yaffa Beck, our
President and CEO, Yoram Drucker, our Chief Operating Officer, and David
Stolick, our Chief Financial Officer. We have used consultants, attorneys and
accountants as necessary. We currently have two scientific and administrative
employees and are in the process of recruiting additional employees as we expect
to increase our staff significantly in the near future.
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 NEXT 3 MONTHS. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL, WE WILL NOT
BE ABLE TO ACHIEVE OUR BUSINESS PLAN, WE MAY BE FORCED TO CEASE OUR OPERATIONS
AND YOU COULD LOSE YOUR INVESTMENT.
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. We will need to raise additional funds through
public or private debt or equity financings within the next 3 months to execute
against our business plan.
At March 31, 2005, we had $645,219 in total current assets and $169,082 in total
current liabilities and on May 10, 2005, we had approximately $ 200,000 in cash.
In October and November 2004 and February 2005, we raised approximately $1.4
million in connection with several closings on a private placement. On May 12,
2005, we raised an additional $149,500 through a private placement of our Common
Stock at $0.80 per share. In late 2004 and early 2005 we began to increase our
spending significantly to execute our development programs. In October 2004, we
made a $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 $142,500 on a
quarterly basis through April 2006, and, if certain research milestones are met,
for an additional two-year period. We have also made capital expenditures in the
approximate amount of $385,000 in order to build out our laboratory and office
facilities to which we relocated in the beginning of June 2005. 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. For the twelve months
ending March 31, 2006, we estimate that our research and development costs will
be approximately $2,000,000 and our general and administrative expenses will be
approximately $900,000.
We will need to raise additional funds through public or private debt or equity
financings within the next 3 months to meet our anticipated expenses so that we
can execute against our business plan. Although we have begun to seek such
additional financings and have retained a financial advisor to assist us in our
efforts, no definitive commitments to provide additional funds have been made by
management, other shareholders or third parties. When additional capital is
needed, 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 fashion, we will be
unable to execute our business plan, we may be forced to cease our operations
and you could lose your investment. If we raise additional funds through the
issuance of equity, equity related or convertible debt securities, these
securities may have rights, preferences or privileges senior to those of the
rights of our common stock and our stockholders may experience additional
dilution. In the event of a bankruptcy in either case, shareholders could loose
their entire investments as a result of the senior preferences or privileges.
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 2005 or for any
interim period since then. As a development stage company, we are at the
earliest stages of executing against 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 drugs resulting from our or our collaborators' research
and development efforts will be commercially available for a significant number
of years, if at all. We do also 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.
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 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 MAY 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. 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. If Ramot elects to
terminate our license, we would need to change our business strategy and we may
be forced to cease operations.
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 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.
WE DEPEND UPON KEY PERSONNEL, NEED ADDITIONAL PERSONNEL AND IF WE ARE UNABLE TO
MAINTAIN OUR CURRENT PERSONNEL OR OBTAIN NEW PERSONNEL OUR RESULTS OF OPERATIONS
WILL BE NEGATIVELY IMPACTED.
Our success depends on services of our President and Chief Executive Officer,
Dr. Yaffa Beck and our consultants, Prof. Melamed and Dr. Offen. The loss of any
of these individuals could have a material and adverse effect on our business
operations. Additionally, the success of our company will largely depend 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 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 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).
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 on 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 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 its
obligations to us, including its 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 (PD) AND OTHER NEURODEGENERATIVE DISEASES.
We face significant competition in our efforts to develop cell therapies and
other treatment or procedures to cure or slow the effects of 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 and licensed to us under
the Ramot Agreement. We have also agreed with Ramot in the Ramot Agreement to
seek comprehensive patent protection for the initial patent and for all future
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
current 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 their obligations to us. Our consultants
typically sign agreements that provide for confidentiality of our proprietary
information and results of studies. However, in connection with every
relationship, we may not be able to maintain the confidentiality of our
technology, the dissemination of which could hurt our competitive position and
results of operations. To the extent that our scientific consultants develop
inventions or processes independently that may be applicable to our proposed
products, disputes may arise as to the ownership of the proprietary rights to
such information, we may expend significant resources in such disputes and we
may not win those disputes.
THE PRICE OF OUR STOCK IS EXPECTED TO BE 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.
ACTUAL OR PERCEIVED SUBSTANTIAL SALES OF SHARES OF OUR COMMON STOCK THAT ARE
CURRENTLY AND MAY IN THE FUTURE BE SUBJECT TO REGISTRATION RIGHTS COULD RESULT
IN A SIGNIFICANT DECLINE IN OUR STOCK PRICE.
In late October and early November 2004 and in February 2005, we issued a total
of 1,894,808 Units for $.75 per Unit pursuant to a private placement, each unit
of which consists of (i) one share of our common stock, (ii) 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 (iii) 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 and warrants that comprise
the Units 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 $.80 per share pursuant to a private
placement to non-U.S. investors. We have begun to seek such additional
financings and have retained a financial advisor to assist us in our efforts.
We issued the following warrants effective the fourth quarter of 2004: (i) to
Ramot and its designees, warrants to purchase, in the aggregate, 10,606,415
shares of our common stock at a purchase price of $.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 $.01 per
share. We have agreed to use best efforts 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 a
warrant in May 2005 to purchase 47,500 shares of our Common Stock as a retainer
to the financial advisor, which warrant has certain piggy back registration
rights.
In November 2004 and February 2005, the Company's Board of Directors adopted and
ratified the 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.
Under the Global Plan, we granted a total of 3,009,452 options with various
exercise prices (a weighted average exercise price of $0.249) and expiration
dates, to officers and employees. Under the U.S. Plan we have reserved for
issuance an additional 500,000 shares of restricted stock for grants to
Scientific Advisory Board members and to a consultant. Furthermore, we expect to
issue 100,000 options and 200,000 restricted shares in accordance with the
compensation of directors that we recently adopted as described in Item 10
below.
In addition, in November 2006, Dr. Beck will be entitled to receive an
additional stock option grant to purchase the number of shares of our common
stock that represents two percent (2%) of our issued and outstanding share
capital as of that date at a price per share of $0.15 each, which additional
options shall vest and become exercisable in thirty six equal monthly
installments commencing as of such date. We have agreed to register the shares
underlying Dr. Beck's, Mr. Drucker's and Mr. Stolick's options on an 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. 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.
YOUR PERCENTAGE OWNERSHIP WILL BE DILUTED BY OPTIONS WE INTEND TO GRANT TO
MANAGEMENT, EMPLOYEES, DIRECTORS AND CONSULTANTS.
In anticipation of hiring new management members and employees, recruiting new
directors and retaining additional advisors, such as Scientific Advisory Board
members, and consultants, we intend to make further grants under our stock
option and incentive plans, pursuant to which we expect issue options to such
individuals. Such issuances will, when made, dilute your percentage ownership in
the company.
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 US AND OUR NON-U.S. RESIDENT DIRECTORS AND
OFFICERS.
Our principal operations are located through our subsidiary in Israel and our
principal assets are located outside the United States. Our President 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.
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
our business. Since the establishment of the State of Israel in 1948, a number
of armed conflicts have occurred between Israel and its Arab neighbours. Since
October 2000, terrorist violence in Israel increased significantly and until
they were recently revived, negotiations between Israel and Palestinian
representatives had effectively ceased. Ongoing or revived hostilities or other
factors related to Israel could harm our operations and research and development
process and could impede on our ability to execute our plan of operations.
Item 2. Description of Property.
The address of our principal executive offices is 1350 Avenue of the Americas,
New York, NY 10019, where in consideration for $350 per month we have a license
to use office space and receive general office services until November 30, 2005
with a one-year renewal option.
On December 1, our Israeli subsidiary, Brainstorm Cell Therapeutics Ltd. (the
"Subsidiary") entered into a lease agreement for the lease of premises in 12
Basel Street, Petach Tikva, Israel, which include approximately 600 square
meters of office and laboratory space. The 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 $4,120) per month during the first 12 months of the lease, (ii)
NIS 19,527 (approximately $4,478) per month during the following 24 months of
the lease, (iii) NIS 22,317 (approximately $5,120) per month during the First
Option period and (iv) NIS 23,712 (approximately $5,440) per month during the
Second Option period.
We recently completed significant leasehold improvements of the Petach Tikva
facility for which we paid the contractor approximately $368,000 and issued it
options to purchase 30,000 shares of our Common Stock at an exercise price of
$0.75 per share. The lessor agreed to reimburse us $75,000 in connection with
these improvements. We currently intend to purchase certain additional
laboratory equipment at an estimated cost of $100,000.
Item 3. Legal Proceedings
We are not a party to any pending litigation and, to our knowledge, none is
contemplated or threatened.
Item 4. Submission of Matters to Vote of Security Holders
On March 28, 2005 at a Special Meeting, our shareholders approved our 2004
Global Share Option Plan and the Israeli Appendix thereto which applies solely
to participants who are residents of Israel (the " Global Plan"), our 2005 U.S.
Stock Option and Incentive Plan (the "U.S. Plan"), and the reservation of
9,143,462 shares of our Common Stock for issuance in aggregate under the Global
Plan and the U.S. Plan (the "Special Meeting"). Any awards granted under the
Global Plan and the U.S. Plan will reduce the total number of shares available
for future issuance under each plan. The Global Plan and U.S. Plan had been
adopted by our Board of Directors on November 25, 2004 and February 24, 2005,
respectively.
Holders of an aggregate 20,867,808 shares of our common stock at the close of
business on February 24, 2005 were entitled to vote at the Special Meeting, of
which 15,782,267 were present in person or represented by proxy. At such
meeting, the Company's stockholders voted as follows:
Total Votes For Total Votes Against Abstentions
---------------------------------------------- ------------
15,782,267 0 0
There were no broker non-votes at the Special Meeting.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
On May 29, 2003, our common stock received approval for quotation on the
National Association of Securities Dealers Inc.'s Over-the-Counter Bulletin
Board (OTC BB) under the name "Wizbang Technologies Inc." and under the symbol
"WZBG.OB". On August 19, 2003 we changed our name to Golden Hand Resources, Inc.
and our symbol to "GDNH.OB". On November 18, 2004, we changed our name to
Brainstorm Cell Therapeutics Inc. and our symbol to "BCLI.OB".
The following table reflects the high and low information for our common stock
for each fiscal quarter during the fiscal years ended March 31, 2004 and March
31, 2005. The information was obtained from Yahoo! Finance and reflects
inter-dealer prices, without retail mark-up, markdown or commission, and may not
necessarily represent actual transactions.
Quarter Ended High(1) Low(1)
March 31, 2005 $3.50 $1.80
December 31, 2004 $2.00 $1.03
September 30, 2004 $1.20 $0.70
June 30, 2004 $1.20 $0.60
March 31, 2004 $1.25 $0.90
December 31, 2003 $1.2 $0.4
September 30, 2003 $0.51 $0.05
June 30, 2003 $0.15 $0.04
(1) Prices reflect a 2 for 1 stock split with an August 11, 2003 record
date.
On May 9, 2005, the closing price for the common stock as reported by the
quotation service operated by the OTC Bulletin Board was $1.60.
As of May 10, 2005, there were 98 holders of record of our common stock. As of
such date, 20,867,808 common shares were issued and outstanding.
First American Stock Transfer, 706 E. Bell Road, Suite 202, Phoenix, Arizona
85022 (Telephone: (602) 485-1346; Facsimile (602) 788-0423 is the registrar and
transfer agent for our common shares.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present
intention of paying any dividends on the shares of our common stock. We have not
had any revenues for the past two fiscal years. Our current policy is to retain
earnings, if any, for use in our operations and in the development of our
business. Our future dividend policy will be determined from time to time by our
board of directors.
Recent Sales of Unregistered Securities
All information relating to sales of unregistered securities in the fiscal year
ended March 31, 2005 has been included in current reports on Form 8-K or
quarterly reports on Form 10-QSB previously filed with the Securities and
Exchange Commission.
Item 6. Plan of Operation
You should read the following plan of operation together with the consolidated
audited financial statements and the notes to consolidated audited financial
statements included elsewhere in this filing prepared in accordance with
accounting principles generally accepted in the United States. This discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those anticipated in
these forward-looking statements.
Overview
The Company was incorporated under the laws of the State of Washington on
September 22, 2000, under the name Wizbang Technologies, Inc. and acquired the
right to market and sell a digital data recorder product line in certain states
in the U.S. Subsequently the Company changed its name to Golden Hand Resources,
Inc. On July 8, 2004, the Company entered into licensing agreement with Ramot to
acquire certain stem cell technology and decided to discontinue all activities
related to the sales of digital data recorder product. On November 22, 2004, the
Company changed its name from Golden Hand Resources Inc. to Brainstorm Cell
Therapeutics Inc. to better reflect its new line of business in development of
novel cell therapies for neurodegenerative diseases. On October 25, 2004, the
company incorporated a wholly owned subsidiary in Israel, which provides
research, development and other services to the Company.
Plan of Operations
Our primary objective over the twelve months ending March 31, 2006 will be 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 neuronal-like cells. The development process will be
conducted in parallel with animal studies in animal models of Parkinson's
disease (mice and rats) to evaluate the engraftment, survival and efficacy of
our cell implants. In addition, we intend 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. Following the optimization of our
bioprocess and analytical methodologies, we intend to conduct feasibility
studies in non-primate models of Parkinson's disease (MPTP - monkeys) to
evaluate engraftment, survival and functionality of our cell implants. All of
these activities will be coordinated with a view towards the execution of safety
and efficacy evaluation studies in MPTP - Parkinson's disease model monkeys, in
preparation for IND submission for conducting clinical trials. 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 will also 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, to
target addional neurodegenerative diseases, such Amyotrophic Lateral Sclerosis
(ALS or Lou Gehrig disease) and Multiple Sclerosis (MS).
In addition we intend to seek 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 March 31, 2005, we had $645,219 in total current assets and $169,082 in total
current liabilities and on May 9, 2005, we had approximately $200,000 in cash.
In October and November 2004 and February 2005, we raised approximately $1.4
million in connection with several closings on a private placement. In May 2005,
we raised an additional $149,500 through a private placement of our Common Stock
at $0.80 per share.
In late 2004 and early 2005 we begun to increase our spending significantly to
execute our development programs. In October 2004, we made a $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 $142,500 on a quarterly basis through April 2006, and, if
certain research milestones are met, for an additional two-year period. We have
also made capital expenditures in the approximate amount of $385,000 in order to
build out our laboratory and office facilities to which we expect to relocate in
the end of May 2005.
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.
We will need to raise additional funds through public or private debt or equity
financings within the next 3 months to meet our anticipated expenses so that we
can execute against our business plan. Although we have begun to seek such
additional financings and have retained a financial advisor to assist us in our
efforts, no definitive 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, we will be unable to execute our business plan and we may be
forced to cease our operations.
Research and Development
During the last 10 months, commencing upon entry into the Ramot Agreement and
ended March 31, 2005, we provided funding for the research performed at the
Felsenstein Medical Research Center by the team led by Prof. Melamed and Dr.
Offen. The 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. Some highlights achieved in this
research include:
o Demonstration that bone marrow stem cells may be expanded prior to
differentiation
o Identification and profiling of cell markers in the expanded
mesenchymal cell population
o Development of molecular tools to evaluate cell differentiation
o Demonstration that the bone marrow derived differentiated cells
produce multiple neuron-specific markers
o Determination of timing and growth conditions for the
differentiation process
o Demonstration of expression of enzymes and proteins associated with
dopamine production and release, including tyrosine hydroxilase
o Identifying the production and release of dopamine and dopamine
precursors in the bone marrow derived differentiated cells
o Evaluation of methodologies for cryopreserving the expanded bone
marrow cells prior to differentiation
o Implantation of the bone marrow derived neural-like cells in
striatum of model animals results in long term engraftment and,
survival, as well as expression of dopamine neuron specific markers,
such as tyrosine hydroxilase
o Model animals implanted with the bone marrow derived neural-like
show significant improvement in their rotational behavior
We intend to continue to fund our collaborators at the university lab. In
parallel, we have constructed and set up a facility, which includes laboratories
for continued development of our proprietary processes.
For the twelve months ending March 31, 2006, we estimate that our research and
development costs will be approximately $2,000,000. 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
also intend to extend our business to the development of novel adult stem cell
and/or genetic therapy for diabetes and/or cardiac disease.
General and Administrative Expenses
For the twelve months ending March 31, 2006, we estimate that our general and
administrative expenses will be approximately $900,000. 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 12-month period ending March
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) process as planned within two to three years:
o Raise equity or debt financing or a combination of equity and debt
financing of at least $10,000,000
o Complete optimization of our NurOwn(TM) process for further
evaluation in monkeys
o Conduct preclinical studies in rodents Parkinson's model to confirm
assess safety and efficacy
o Conduct feasibility studies in MPTP-monkeys to evaluate cell
engraftment and survival of the cell implants
Purchase or Sale of Equipment
The company's subsidiary leases a facility in Petach Tikva, Israel. The facility
was designed to include 600 square meters or lab space, in addition to
administrative and executive offices. We signed an agreement for the
construction of this facility with an expert contractor in consideration for $
368,585 and options to purchase 30,000 company's shares at an exercise price of
$ 0.75. As of March 31, 2005 the remaining obligation for this construction
amounted to $ 204,815 and the options had not been granted yet. As of March 31,
2005, the Company has purchased laboratory equipment and furniture for a total
sum of approximately $36,000 and we intend to purchase additional lab and office
equipment at an estimated cost of approximately $100,000
Going Concern
Due to our being a development stage company and not having generated revenues,
in the consolidated financial statements for the year ended March 31, 2005, we
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our consolidated financial statements contain
additional note disclosures describing the circumstances that lead to this
disclosure.
Our annual financial statements have been prepared on the going concern basis,
which assumes the realization of assets and liquidation of liabilities in the
normal course of operations. The financial statements have been prepared
assuming we will continue as a going concern. However, certain conditions exist
which raise doubt about our ability to continue as a going concern. We have
suffered recurring losses from operations and have accumulated losses of
approximately $19,002,482 since inception through the year ended March 31, 2005.
The continuation of our business is dependent upon us raising additional
financial support. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders.
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.
Item 7. Financial Statements
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(A development stage company)
(Formerly: Golden Hand Resources Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
IN U.S. DOLLARS
INDEX
Page
-----------------
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Statements of Changes in Stockholders' Equity (Deficiency) F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 - F-24
- - - - - - - - - - - - - - - - - - -
[logo Ernst & Young]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders of
BRAINSTORM CELL THERAPEUTICS INC.
(A development stage company)
We have audited the accompanying consolidated balance sheet of Brainstorm
Cell Therapeutics Inc. (Formerly: Golden Hand Resources Inc.) ("the Company") (a
development stage company) and its subsidiary as of March 31, 2005 and the
related consolidated statements of operations, statements of changes in
shareholders' equity and the consolidated statements of cash flows for the year
then ended and for the period from September 22, 2000 (inception) through March
31, 2005. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements as of March 31, 2004 and
for the period from September 22, 2000 (inception) through March 31, 2004, were
audited by other auditors whose report dated May 26, 2004 expressed an
unqualified opinion on those statements. The consolidated financial statements
for the period from September 22, 2000 (inception) through March 31, 2004
included an accumulated deficit of $ 162,687. Our opinion on the consolidated
statements of operations, changes in shareholders' equity and cash flows for the
period from September 22, 2000 (inception) through March 31, 2005, insofar as it
relates to amounts for prior periods through March 31, 2004, is based solely on
the report of other auditors.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Company's internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit and the report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audit and the report of the other auditors,
the consolidated financial statements referred to above, present fairly, in all
material respects, the consolidated financial position of the Company and its
subsidiary as of March 31, 2005, and the consolidated results of their
operations and cash flows for the year then ended and for the period from
September 22, 2000 (inception) through March 31, 2005, in conformity with U.S
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As more fully described in Note
1(g), the Company is in a development stage and as such has incurred operating
losses and has a negative cash flow from operating activities. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
/s/ Kost Forer Gabbay & Kasierer
Tel-Aviv, Israel KOST FORER GABBAY & KASIERER
June 2, 2005 A Member of Ernst & Young Global
-F-2-
[LETTERHEAD OF MANNING ELLIOTT]
Independent Auditors' Report
To the Stockholders and Board of Directors of
Golden Hand Resources Inc. (formerly Wizbang Technologies, Inc.)
We have audited the accompanying balance sheets of Golden Hand Resources Inc.
(formerly Wizbang Technologies, Inc.) as of March 31, 2004 and 2003 and the
related statements of operations, cash flows and stockholders' equity for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of Golden Hand Resources Inc.
(formerly Wizbang Technologies, Inc.), as of March 31, 2004 and 2003, and the
results of its operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has not attained profitable operations since inception
and has a working capital deficit. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also discussed in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
As discussed in Note 8 to the accompanying financial statements, the Company has
restated its financial statements for the year ended March 31, 2004.
/s/ "Manning Elliott"
CHARTERED ACCOUNTANTS
Vancouver, Canada
May 26, 2004 except as to Note 8
which is as of November 16, 2004
-F-3-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
In U.S. dollars (except share data)
March 31,
2005
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 526,519
Restricted cash 31,134
Accounts receivable and prepaid expenses (Note 5) 87,566
-----------
Total current assets 645,219
-----------
SEVERANCE PAY FUND 5,871
-----------
PROPERTY AND EQUIPMENT, NET (Note 6) 228,315
-----------
Total assets 879,405
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Trade payables 37,850
Other accounts payable and accrued expenses (Note 7) 131,232
-----------
Total current liabilities 169,082
-----------
ACCRUED SEVERANCE PAY 5,871
-----------
Total liabilities 174,953
-----------
STOCKHOLDERS' EQUITY :
Share capital:
Common stock of $ 0.00005 par value - Authorized: 200,000,000 shares at
March 31, 2005; Issued and outstanding: 20,867,808 at March 31, 2005
(Note 9) 1,044
Preferred stock of $ 0.00005 par value - Authorized: 40,000,000 shares at
March 31, 2005; none issued --
Additional paid-in capital 25,100,625
Deferred stock- based compensation (5,394,735)
Deficit accumulated during the development stage (19,002,482)
-----------
Total stockholders' equity 704,452
-----------
Total liabilities and stockholders' equity 879,405
===========
The accompanying notes are an integral part of the consolidated financial
statements.
-F-4-
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
Year ended date) through
March 31, March 31,
2004 2005 2005
----------- ----------- -----------
Operating expenses:
Research and development -- 472,042 472,042
Research and development expenses related to shares, warrants and
options granted to employees and service providers -- 15,878,451 15,878,451
General and administrative -- 265,131 265,131
General and administrative expenses related to shares, warrants and
options granted to employees and services providers -- 2,211,422 2,211,422
----------- ----------- -----------
Total operating expenses -- 18,827,046 18,827,046
Financial expenses, net -- 5,996 5,996
----------- ----------- -----------
Loss from continuing operations -- (18,833,042) (18,833,042)
Income taxes (Note 10) -- (5,469) (5,469)
----------- ----------- -----------
Loss from continuing operations -- (18,838,511) (18,838,511)
Net loss from discontinued operations (73,295) (1,284) (163,971)
----------- ----------- -----------
Net loss (73,295) (18,839,795) (19,002,482)
=========== =========== ===========
Basic net loss per share from continuing operations -- (1.01)
=========== ===========
Weighted average number of shares outstanding 17,100,000 18,587,317
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
-F-5-
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)
Deficit
accumulated Total
Common stock Additional Deferred uring the stockholders'
-------------------------- paid-in stock -based development equity
Number Amount capital compensation stage (deficiency)
----------- ----------- ----------- ----------- ----------- -----------
Balance as of September 22, 2000 (date
of inception) -- -- -- -- -- --
Stock issued on September 22, 2000 for
cash at $ 0.00188 per share 8,500,000 850 15,150 -- -- 16,000
Stock issued on March 31, 2001 for cash
at $ 0.0375 per share 1,600,000 160 59,840 -- -- 60,000
Contribution of capital -- -- 7,500 -- -- 7,500
Net loss -- -- -- -- (17,026) (17,026)
----------- ----------- ----------- ----------- ----------- -----------
Balance as of March 31, 2001 10,100,000 1,010 82,490 -- (17,026) 66,474
Contribution of capital -- -- 11,250 -- -- 11,250
Net loss -- -- -- -- (25,560) (25,560)
Balance as of March 31, 2002 10,100,000 1,010 93,740 -- (42,586) 52,164
Contribution of capital -- -- 15,000 -- -- 15,000
Net loss -- -- -- -- (46,806) (46,806)
----------- ----------- ----------- ----------- ----------- -----------
Balance as of March 31, 2003 10,100,000 1,010 108,740 -- (89,392) 20,358
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 -- -- 6,500
Cancellation of shares granted to
Company's President (10,062,000) (503) 503 -- -- --
Contribution of capital -- -- 15,000 -- -- 15,000
Net loss -- -- -- -- (73,295) (73,295)
----------- ----------- ----------- ----------- ----------- -----------
Balance as of March 31, 2004 10,238,000 512 130,738 -- (162,687) (31,437)
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 -- -- 60,175
Stock-based compensation related to
shares granted to service providers 2,025,000 101 1,632,699 -- -- 1,632,800
Contribution of capital (Note 9b) -- -- 7,500 -- -- 7,500
Stock issued in 2004 for private
placement at $ 0.75 per unit (Note
1(h)) 1,894,808 95 1,418,042 -- -- 1,418,137
Cancellation of shares granted to
service providers (Note 9(b)) (1,800,000) (90) 90 -- -- --
Deferred stock-based compensation
related to options granted to
employees -- -- 5,978,759 (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 -- -- 15,873,048
Net loss -- -- -- -- (18,839,795) (18,839,795)
----------- ----------- ----------- ----------- ----------- -----------
Balance as of March 31, 2005 20,867,808 1,044 25,100,625 (5,394,735) (19,002,482) 704,452
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
-F-6-
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY
(Formerly: Golden Hand Resources Inc.)
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
Period from
September 22,
Year ended 2000 (inception
March 31, date) through
-------------------------- ,March 31,
2005 2004 2005
----------- ----------- -----------
Cash flows from operating activities:
Net loss (18,839,795) -- (19,002,482)
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 245 245
Expenses related to shares and options granted to service
providers 17,481,648 -- 17,481,648
Amortization of deferred stock-based compensation related to
options granted to employees 584,024 -- 584,024
Increase in accounts receivable and prepaid expenses (82,822) -- (82,822)
Increase in trade payables 37,850 -- 37,850
Increase in other accounts payable and accrued expenses 126,082 -- 126,082
----------- ----------- -----------
Net cash used in continuing operating activities (691,484) -- (691,484)
Net cash provided by (used in) discontinued operating activities 13,648 (15,436) (22,766)
----------- ----------- -----------
Total net cash used in operating activities (677,836) (15,436) (714,250)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (228,560) -- (228,560)
Restricted cash (31,134) -- (31,134)
Investment in lease deposit (4,590) -- (4,590)
----------- ----------- -----------
Net cash used in continuing investing activities (264,284) -- (264,284)
Net cash flows used in discontinued investing activities -- -- (16,000)
----------- ----------- -----------
Total net cash used in investing activities (264,284) -- (280,284)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of Common stock and warrants, net 1,478,312 -- 1,478,312
----------- ----------- -----------
Net cash provided by continuing financing activities 1,478,312 -- 1,478,312
Net cash provided by(used in) discontinued financing activities (14,277) 10,044 42,741
----------- ----------- -----------
Total net cash provided by financing activities 1,464,035 10,044 1,521,053
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents 521,915 (5,392) 526,519
Cash and cash equivalents at the beginning of the period 4,604 9,996 --
----------- ----------- -----------
Cash and cash equivalents at end of the period 526,519 4,604 526,519
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
-F-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 (except share data)
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
promissory note. On October 6, 2003, the Company issued
100,000 shares to the vendor pursuant to the agreement.
On May 4, 2004, the Dalhousie Mineral Claim was returned to
the vendor. As a result, in the first quarter of 2004, the
Company has recorded a gain from forgiveness of debt, which
has been charged to the statement of operations.
c. 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 years 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 engaged in any activities related to the sale of the
digital data recorder product.
d. 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-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 (except share data)
NOTE 1:- GENERAL (Cont.)
The results of the discontinued operations are summarized as
follows:
Year ended March 31,
----------------------
2005 2004
-------- --------
Amortization $ -- $ 23,714
Donated services and rent 3,750 15,000
Professional fees 926 8,577
Expenses related to shares granted to service providers 24,200 --
Consulting revenue (10,350) --
Mineral properties -- 16,500
Gain on forgiveness of debt (30,700) --
Loss on impairment of intangible asset 11,471 --
Other 1,987 9,504
-------- --------
Net loss $ 1,284 $ 73,295
======== ========
e. On October 25, 2004, the Company formed a wholly-owned
subsidiary in Israel, Brainstorm Cell Therapeutics Ltd.
("BCT"). On March 14, 2005, the Company signed an agreement
with its subsidiary effective as of November, 2004,
according to which the subsidiary will provide research,
development and other services to the Company. In return,
the subsidiary will be entitled to receive reimbursement of
expenses incurred by it in the process of performing the
research and development services plus 10% of such
reimbursement amounts.
f. On February 23, 2005, the Company completed a private
placement round for the sale of 1,894,808 units, at a price
per unit of $ 0.75 (see Note 9c).
g. The Company's ability to continue to operate as a going
concern is dependent upon additional financial support.
These financial statements do not include any adjustments
relating to the recoverability and classification of
assets' carrying amounts or the amount and classification
of liabilities that may be required should the Company be
unable to continue as a going concern.
The Company intends to raise additional capital to fund its
operations. 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, until profitability is achieved.
Accordingly, the Company will likely reduce general and
administrative expenses and cease or delay the development
project until it is able to obtain sufficient financing.
There can be no assurance that sufficient revenues will be
generated and that additional funds will be available on
terms acceptable to the Company, or at all.
-F-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 (except share data)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of presentation:
The consolidated financial statements have been prepared in
accordance with United States generally accepted accounting
principles.
b. Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
c. Financial statement in U.S. dollars:
The functional currency of the Company is the U.S. dollar ("dollar")
since the dollar is the currency of the primary economic environment
in which the Company has operated and expects to continue to operate
in the foreseeable future. Part of the transactions of the
subsidiary is recorded in new Israeli shekels ("NIS"); however, a
substantial portion of the subsidiary's costs is incurred in dollars
and parts of the expenses are linked to the dollar. Accordingly,
management has designated the dollar as the currency of its
subsidiary's primary economic environment and thus it is their
functional and reporting currency.
Transactions and balances denominated in dollars are presented at
their original amounts. Non-dollar transactions and balances have
been remeasured to dollars in accordance with the provisions of
Statement of Financial Accounting Standard No. 52 "Foreign Currency
Translation". All transaction gains and losses from remeasurement of
monetary balance sheet items denominated in non-dollar currencies
are reflected in the statement of operations as financial income or
expenses, as appropriate.
d. Principles of consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. Intercompany balances and
transactions have been eliminated upon consolidation.
e. Cash equivalents:
Cash equivalents are short-term highly liquid investments that are
readily convertible to cash with maturities of three months or less
as of the date acquired.
-F-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 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f. Property and equipment :
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is calculated by the straight-line method
over the estimated useful lives of the assets. The annual
depreciation rates are as follows:
%
------
Office furniture and equipment 7
Computer software and electronic equipment 33
Laboratory equipment 15
Leasehold improvements Over the term of the lease
g. Impairment of long-lived assets:
The Company and it subsidiary's long-lived assets are reviewed for
impairment in accordance with Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS No. 144") whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to the
future undiscounted cash flows expected to be generated by the
assets. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceeds their fair value. During 2004, no
impairment losses were identified.
h. Research and development costs:
Research and development costs are charged to expenses as incurred.
i. Severance pay:
The liability of the subsidiary for severance pay is calculated
pursuant to the Severance Pay Law in Israel, based on the most
recent salary of the employees multiplied by the number of years of
employment as of the balance sheet date and is presented on an
undiscounted basis.
The subsidiary's employees are entitled to one month's salary for
each year of employment or a portion thereof. The subsidiary's
liability for all of its employees is fully provided by monthly
deposits with insurance policies and by an accrual. The value of
these policies is recorded as an asset in the Company's balance
sheet.
-F-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 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The deposited funds may be withdrawn only upon the fulfillment of
the obligation pursuant to Israel's Severance Pay Law or labor
agreements. The value of the deposited funds is based on the cash
surrendered value of these policies, and includes immaterial
profits.
Severance expenses for the year ended March 31, 2005, were $ 5,871.
j. 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.
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 a Black-Scholes option pricing model, with
the following weighted-average assumptions for grants during the
year ended March 31, 2005: weighted average volatility of 109%,
risk-free interest rate of 4.51%, dividend yields 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:
Year ended March 31,
----------------------------
2005 2004
------------ ------------
Net loss as reported $ 18,839,795 $ 73,295
Deduct: share-based employee compensation expense included in
reported net loss in accordance with APB-25 (584,024) --
Add: stock-based employee compensation expense determined
under fair value method 626,631 --
------------ ------------
Pro forma net loss $ 18,882,402 $ 73,295
============ ============
Pro forma net loss per share (basic and diluted) $ 1.02 $ --
============ ============
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.
-F-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 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k. Basic and diluted net loss per share:
Basic net loss per share is computed based on the weighted average
number of shares outstanding during each year. Diluted net loss per
share is computed based on the weighted average number of shares
outstanding during each year, plus the dilutive potential of the
Common stock considered outstanding during the year, in accordance
with Statement of Financial Standard No. 128, "Earnings per Share"
("SFAS No. 128").
All outstanding share options and warrants have been excluded from
the calculation of the diluted loss per share for the year ended
March 31, 2005, because all such securities have an anti-dilutive
effect.
Such outstanding securities consist of the following:
Year ended
March 31,
2005
----------
Options 3,009,452
Warrants 18,390,458
----------
Total 21,399,910
==========
l. Income taxes:
The Company and its subsidiary account for income taxes in
accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes". This Statement requires the use of
the liability method of accounting for income taxes, whereby
deferred tax asset and liability account balances are determined
based on the differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are
expected to reverse. The Company and its subsidiary provide a
valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value.
m. Fair value of financial instruments:
The following methods and assumptions were used by the Company and
its subsidiary in estimating their fair value disclosures for
financial instruments:
The carrying values of cash and cash equivalents, accounts
receivable and prepaid expenses, trade payables and other accounts
payable and accrued expenses, approximate their fair value due to
the short-term maturity of these instruments.
-F-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 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n. Concentrations of credit risks:
Financial instruments that potentially subject the Company and its
subsidiary to concentrations of credit risk consist principally of
cash and cash equivalents.
Cash and cash equivalents are deposited in banks in the United
States and in Israel. Such deposits in the United States may be in
excess of insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions that hold the
Company's investments are financially sound and, accordingly,
minimal credit risk exists with respect to these investments.
The Company has no off-balance-sheet concentration of credit risk
such as foreign exchange contracts, option contracts or other
foreign hedging arrangements.
o. 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 income and earnings per
share in Note 2k to the consolidated financial statements.
In March 2005, the SEC staff issued Staff Accounting Bulletin No.
107 (SAB 107) to give guidance on implementation of statement 123R,
which the Company plans to consider in implementing statement 123R.
-F-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 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
p. Reclassification:
Amounts from prior years, that were classified as "Donated capital"
in stockholders' deficiency have been reclassified and subtotaled
into additional paid-in capital. The reclassification has no effect
on previously reported net loss, total stockholders' equity and cash
flows.
NOTE 3:- RESEARCH AND LICENSE AGREEMENT
a. 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 may terminate the agreement if
the Company fails to reach certain development milestones or
materially breaches the agreement. As of the date of these financial
statements, the Company fulfilled all its obligations.
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, 16% of
Ramot warrants, and Mr. Yosef Levy (a member of the research team)
shall be issued 8% of the Ramot warrants.
The fair value of the warrants granted, totaling $ 13,151,955 was
charged to the statement of operations as research and development
expenses.
On March 21, 2005, the Company entered into lock up agreements with
Ramot with respect to warrants held by it .Under the lock-up
agreements, Ramot 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.
-F-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 3:- RESEARCH AND LICENSE AGREEMENT (cont.)
b. On October 29, 2004, the Company transferred to Ramot $ 100,000 as
the upfront payment, $ 17,000 as reimbursement for patent related
expenses and $ 285,000 as the first installment of the annual
research funding, on account of the research and license agreement.
NOTE 4:- CONSULTING AGREEMENTS
a. 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
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 fair value of the warrants granted, totaling $ 2,721,093 were
charged to the statement of operations as research and development
expenses.
On March 21, 2005, the Company entered into lock up agreements with
the Consultants with respect to warrants held by them (see Note 3a).
b. As of March 31, 2005, the Company has paid a total of $ 60,000 for
services rendered in respect of the Consultants.
NOTE 5:- ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
March 31,
2005
------
Government authorities 36,661
Prepaid expenses 50,905
------
87,566
======
-F-16-
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:- PROPERTY AND EQUIPMENT
March 31,
2005
------------
Cost:
Office furniture and equipment 946
Computer software and electronic equipment 4,096
Laboratory equipment 35,649
Leasehold improvements 187,869
------------
228,560
------------
Accumulated depreciation:
Office furniture and equipment --
Computer software and electronic equipment 245
Laboratory equipment --
Leasehold improvements --
------------
245
------------
Depreciated cost 228,315
============
Depreciation expenses for the year ended March 31, 2005 were $ 245.
The Company has not yet started to use the leasehold improvement,
office furniture and equipment and therefore no depreciation in
respect thereof has been recorded.
NOTE 7:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
March 31,
2005
------------
Employees and payroll accruals 34,346
Accrued expenses 96,886
------------
131,232
============
NOTE 8:- COMMITMENTS AND CONTINGENCIES
a. The Company signed an agreement for the lease of its facilities
commencing June 2005. The facilities and vehicles of the Company are
rented under operating leases that expire on various dates.
Aggregate minimum rental commitments under non-cancelable leases as
of March 31, 2005 are as follows:
Year ending March 31, Facilities Vehicles Total
------------------------------ ---------------- ---------------- ----------------
2006 59,029 30,166 89,195
2007 63,327 30,166 93,493
2008 63,327 27,793 91,120
---------------- ---------------- ----------------
185,683 88,125 273,808
================ ================ ================
-F-17-
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)
Total rent expenses for the year ended March 31, 2005 were $ 1,555
NOTE 8:- COMMITMENTS AND CONTINGENCIES (Cont.)
b. The Company's subsidiary gave a bank guarantee in the amount of $
31,134 to secure its obligation under the facilities lease
agreement.
c. On March 23, 2005, the Company signed an agreement for the
construction of its research and development facility in
consideration for $ 368,585 and options to purchase 30,000 of the
company's common shares at an exercise price of $ 0.75 per share. As
of March 31, 2005 the remaining obligation amount to $ 204,815 and
the options have not been granted yet.
NOTE 9:- 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 Common stock are 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).
2. On February 23, 2005, the Company completed a private placement
round for 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 October 2004, November 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'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.
-F-18-
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 9:- STOCK CAPITAL (Cont.)
Shares and warrants to service providers
4. Summary of warrants issued to service providers and to investors:
The Company's outstanding warrants that were granted to service
providers and to investors as of March 31, 2005 are as follows:
Issuance date Number of Exercise Warrants Exercisable
warrants price exercisable through
-------------------------------------- -------------- -------------- -------------- ------------------
$
October 2004 (see Note 9(c)2) 1,256,260 $ 1.5-2.5 0 October 2014
November 2004 (see Note 9(c)2) 626,554 $ 1.5-2.5 0 November 2014
November 2004 (see Note 3 and 4) 12,800,844 $ 0.01 0 November 2009
December 2004 (see Note 9(c)6) 1,800,000 $ 0.00005 1,800,000 December 2014
February 2005 (see Note 9(c)2) 1,906,800 $ 1.5-2.5 0 February 2015
-------------- --------------
18,390,458 1,800,000
============== ==============
The fair value for the warrants to service providers was estimated
on the date of grant using Black-Scholes option pricing model, with
the following weighted-average assumptions for for the year ended
March 31, 2005; weighted average volatility of 109%, risk-free
interest rates of 3.91% dividend yields of 0% and a weighted average
life of the options of ten years.
5. On June 1 and June 4, 2004, the Company issued 40,000 and 150,000
Common shares for 12 months filing services and legal and
due-diligence services 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, were
recorded as equity issuance cost and did not effect the statement of
operations.
6. 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 in
2005 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.
7. 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.
-F-19-
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)
8. On November 4, 2004, the Company granted Ramot, 10,606,415 warrants
at an exercise price of $ 0.01 per share (see Note 3a).
NOTE 9:- STOCK CAPITAL (Cont.)
9. On November 4, 2004, the Company granted two consultants 2,194,430
warrants at an exercise price of $ 0.01 per share (see Note 4a).
10. 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 $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 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 not issued yet.
11. On March 15 and March 28, 2005, the Company signed an agreement with
two members of its Scientific Advisory Board according to which the
Company shall issue to the members of the Scientific Advisory Board
200,000 share of restricted stock at a purchase price $ 0.00005
under the U.S Stock Option and Incentive Plan (100,000 each). The
restricted shares will be 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 stocks shall
lapse in three annual and equal portions commencing the grant date.
The restricted shares were not issued yet.
Options to employees and to directors
12. On March 28, 2005 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), 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. In the event of termination of optionee's
employment or service, all options granted to such optionee's shall
immediately expire.
As of March 31, 2005, 3,309,452 warrants were issued under the plans
(3,009,452 to employees and directors and 300,000 to service
providers) leaving 5,834,010 shares available for future grants.
-F-20-
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 9:- STOCK CAPITAL (Cont.)
13. A summary of the Company's option activity related to options to
employees and directors, and related information is as follows:
March 31, 2005 March 31, 2004
------------------------------- -------------------------------
Weighted
average Weighted
Amount of exercise Amount of average
options price options exercise price
-------------- --------------- -------------- ----------------
$ $
------------- -------------
Outstanding at the beginning of the -- -- -- --
year
Granted 3,009,452 0.249 -- --
Exercised -- -- -- --
------------- -------------
Outstanding at the end of the year 3,009,452 0.24 -- --
============= ============= ============= =============
Exercisable options at the end of
the year 291,327 0.17 -- --
============= ============= ============= =============
14. The options outstanding as of March 31, 2005, have been separated
into exercise prices, as follows:
Options
outstanding Weighted average Options exercisable
as of remaining as of
Exercise March 31, contractual Marchy 31,
price 2005 life 2005
---------------------------- ----------------------- ---------------------
$ Years
---------------------------- ---------------------
0.15 2,514,452 9.62 279,383
0.75 495,000 9.88 11,944
----------------------- ---------------------
3,009,452 291,327
======================= =====================
15. All options were granted with exercise prices that were lower than
the market price of the Company's Common stock on the date of grant.
Weighted average fair values and weighted average exercise prices of
options at date of grant are as follows:
March 31,
-------------------
2005 2004
-------- --------
Weighted average exercise price 0.249 --
Weighted average fair value on date of grant 1.49 --
Compensation expenses recorded by the Company in respect of its
share-based employee compensation awards in accordance with APB 25
amounted to $ 584,024 for the year ended March 31, 2005.
-F-21-
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 10:- TAXES ON INCOME
a. Tax rates applicable to the income of the subsidiary:
Until December 31, 2003, the regular corporate tax rate applicable
to income of companies in Israel was 36%. In June 2004, an amendment
to the Income Tax Ordinance (No. 140 and Temporary Provision), 2004
was passed by the "Knesset" (Israeli parliament), which determines,
among other things, that the corporate tax rate is to be gradually
reduced to the following tax rates: 2004 - 35%, 2005 - 34%, 2006 -
32% and 2007 and thereafter - 30%.
b. Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
assets are as follows:
March 31,
2005
------------
Operating loss carryforward 199,698
Reserves and allowances 1,963
------------
Net deferred tax asset before valuation allowance 201,661
Valuation allowance ) (201,661
------------
Net deferred tax asset --
============
As of March 31, 2005, the Company has provided valuation allowances
of $ 201,661 in respect of deferred tax assets resulting from tax
loss carryforwards and other temporary differences. Management
currently believes that since the Company has a history of losses,
it is more likely than not that the deferred tax regarding the loss
carryforwards and other temporary differences will not be realized
in the foreseeable future.
c. Available carryforward tax losses:
As of March 31, 2005, the Company has an accumulated tax loss
carryforward of approximately $ 633,962. Carryforward tax losses in
the U.S. can be carried forward and offset against taxable income in
the future for a period of 20 years. Utilization of U.S. net
operating losses may be subject to substantial annual limitations
due to the "change in ownership" provisions of the Internal Revenue
Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses before utilization.
-F-22-
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 10:- TAXES ON INCOME (Cont.)
d. Loss from continuing operations, before taxes on income, consists of
the following:
Year ended March
31,
2005
-----------
United States (18,848,668)
Israel 15,626
-----------
(18,833,042)
===========
e. Taxes on income included in the statement of operations:
Year ended
March 31,
2005
-----------
Current taxes:
United States --
Israel (5,469)
------
(5,469)
======
NOTE 11:- TRANSACTIONS WITH RELATED PARTIES
Year ended March 31,
--------------------------------------
2005 2004
----------------- ------------------
a. Fees and related benefits and compensation expenses in 396,000 -
respect of options granted to member of the Board of
Directors
================= ==================
Salary and related benefits and compensation
expenses in respect of options granted to an employee
who is a shareholder 126,041 -
================= ==================
b. As for transactions with Ramot see Note 3.
-F-23-
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 12:- SUBSEQUENT EVENTS
a. On May 12, 2005, the Company issued to a certain investor 186,875 of
its Common shares for total proceeds of $ 149,500.
b. On May 27, 2005, two of the Company's non-employee directors were
granted 100,000 restricted shares, which are subject to the
Company's right to repurchase them at a purchase price of par value
($ 0.00005), and one of the Company's non-employee directors was
granted an option to purchase 100,000 shares of its common stock, at
an exercise price of $ 0.75, vesting in three equal annual
installments beginning on May 27, 2006.
-F-24-
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
Item 8A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this Annual Report, our Chief Executive
Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures pursuant to Rule 3a-14 of the Securities
Exchange Act of 1934 (the "Exchange Act"), which disclosure controls and
procedures are designed to provide reasonable assurances that information
required to be disclosed by a company in the report that it files under the
Exchange Act is recorded, processed summarized and reported within required time
periods specified by the SEC's rules and forms. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely providing alerts to
material information relating to the company required to be included in the
company's periodic SEC filings.
(b) Changes in Internal Control.
Subsequent to the date of such evaluation as described in subparagraph (a)
above, there were no changes in our internal controls or other factors that
could materially affect these controls, including any corrective action with
regard to significant deficiencies and material weaknesses.
Item 8B. Other Information
None.
PART III
Item 9. Directors and Executive Officers
Directors and Executive Officers, Promoters and Control Persons
Set forth below is a summary description of the principal occupation and
business experience of each of the Company's directors and executive officers
for at least the last five years.
Name Age Position
--------------------------- ----- ---------------------------------
Dr. Yaffa Beck 53 President, Chief Executive Officer, and Director
Yoram Drucker 40 Chief Operating Officer
David Stolick 39 Chief Financial Officer
Irit Arbel 45 Director
Michael Greenfield (Ben-Ari) 45 Director
Robert Shorr 51 Director
Dr. Yaffa Beck joined the Company as our President and CEO and as a director in
November 2004. Before joining the Company, she was President and CEO of VentuRx
Holdings Ltd., her own consulting company from April 2002 to her appointment.
From May 1995 until April 2002 she was Executive Vice President and Chief
Operating Officer of D-Pharm Ltd., a company she co-founded. Prior to 1995 she
held management positions at Orgenics Ltd. and Biotechnology General Ltd. Dr.
Beck serves on the Boards of several privately held life sciences companies and
continues to provide consulting services through VentuRx Holdings to the
Tel-Aviv University Future Technology Development Limited Partnership which is
an affiliate of Ramot, the technology transfer company of Tel-Aviv University.
Dr. Beck holds a D.SC. from the University of Pretoria, RSA and a degree in
Management and Administration from Bradford University (UK).
Mr. Yoram Drucker joined the Company as our Chief Operating Officer in November
2004. Since 1998, Mr. Drucker has been an independent consultant regarding
business development, finance, strategy, and operations. From 1997 to 1998, Mr.
Drucker managed a real estate brokerage firm. From 1995 through 1996, Mr.
Drucker managed his own promotion company and created and designed marketing and
promotion concepts for various Israeli Companies. From 1990 through 1995, Mr.
Drucker served as manager of the production department of one of Israel's
largest diamond factories. Mr. Drucker also serves as director of Pluristem Life
Systems, Inc.
Mr. David Stolick joined the Company in February 2005. From 1995 to 2005, Mr.
Stolick was Corporate Controller of M-Systems Flash Disk Pioneers Ltd., a NASDAQ
listed company. In 1994 he served as Deputy Controller of Electronics Line Ltd.,
an Israeli publicly traded Company, and from 1991 until 1994 he was Audit
Manager at Goldstein, Sabbo, and Tebet Accountants. Mr. Stolick holds a B.A. in
Economics and Accounting from Ben-Gurion University. He has been qualified as a
certified accountant in Israel since 1993.
Dr. Irit Arbel joined the Company in May 2004 as a director and as our
President. She served as President until she resigned in November 2004 in order
to enable Dr. Beck's appointment. Dr. Arbel was President and CEO of Pluristem
Life Systems, Inc. from 2003 to June 2004, and was Israeli Sales Manager of
Merck, Sharp & Dohme from 1998 to 2002. From 1995 to 1997, Dr. Arbel served as
the head of research for Hadassa-Ein Karem Hospital in Jerusalem. Dr. Arbel
specialized in the use of pharmaceuticals for neurology, ophthalmology and
dermatology treatments. Dr. Arbel earned her Post Doctorate degree in 1997 in
Neurobiology, after performing research in the area of Multiple Sclerosis. Dr.
Arbel also holds a Chemical Engineering degree from the Technion, Israel's
Institute of Technology.
Mr. Michael Greenfield (Ben-Ari) became a director of the Company in December
2004. Mr. Greenfield (Ben-Ari) manages Evergreen Field Enterprises, his own
consulting company which he formed in 1997. From 1991 to 1997, Mr. Greenfield
(Ben-Ari) served as Vice President of Marketing at Bank Leumi. Mr. Greenfield
holds an MBA from Tel-Aviv University and a BA from Brandeis University.
Dr. Robert Shorr joined the Company as a director in March 2005. Since 2000, Dr.
Shorr serves as President and CEO of Cornerstone Pharmaceuticals, a
bio-technology company. Since 1998 he has also served as Director of Business
Development at the State University of New York at the Stony Brook Center for
Advanced Technology. From 1998 until 2002 Dr. Shorr was Vice-President of
Science and Technology (CSO) of United Therapeutics, a NASDAQ listed company.
From 1999 he serves as trustee at the Tissue Engineering Charities, Imperial
College, London. Prior to 1998 he held management positions at Enzon Inc., a
NASDAQ listed company, and AT Biochem of which he was also founder. Dr. Shorr
also served on the Board of Directors of Biological Delivery Systems Inc., a
NASDAQ listed company. Dr. Shorr holds both a Ph.D and a D.I.C from the
University of London, Imperial College of Science and Technology as well as a
BSc. from the State University of New York.
Committees of the Board
The Board of Directors has not yet created an audit committee. We added two
"independent" directors (as the term is used in Item 7(d)(3)(iv) of Schedule 14A
under the Securities Exchange Act of 1934, as amended) to our Board in December
2004 and March 2005, and we intend to constitute an audit committee as well as a
compensation committee consisting of such independent directors in the near
future. Until then, however, our Board of Directors serves these functions.
Family Relationships
There are no family relationships between the executive officers or directors of
the Company.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control persons have
been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences);
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
4. being found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
Code of Ethics
Effective May 27, 2005, our Board of Directors adopted a Code of Business
Conduct and Ethics that applies to, among other persons, members of our Board of
Directors, our officers including our Chief Executive Officer (being our
principal executive officer) and our Chief Financial Officer (being our
principal financial and accounting officer), contractors, consultants and
advisors.
We will provide a copy of the Code of Business Conduct and Ethics to any person
without charge, upon request. Requests can be sent to BrainStorm Cell
Therapeutics Inc., 1350 Avenue of the Americas New York, NY 10019, Attn: Chief
Financial Officer.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our executive officers and
directors, and persons who own more than 10% of our common stock, to file
reports regarding ownership of, and transactions in, our securities with the
Securities and Exchange Commission and to provide us with copies of those
filings. Based solely on our review of the copies of such forms received by us,
or written representations from certain reporting persons, we believe that
during fiscal year ended March 31, 2005, all filing requirements applicable to
its officers, directors and greater than ten percent beneficial owners were
complied with, with the exception of the Form 3 - Initial Statement of
Beneficial Ownership of Securities - of our director Michael Greenfield (Ben
Ari) which was filed three days late.
Item 10. Executive Compensation.
The following table summarizes, to the end of fiscal year ended March 31, 2005,
the compensation of Dr. Yaffa Beck, our President and CEO since November 2004,
Yoram Drucker, our Chief Operating Officer since November 2004, David Stolick,
our Chief Financial Officer since February 2005, and Dr. Irit Arbel, who served
as President from April 2004 until November 2004 and as a director since
November 2004. No officers or directors received annual compensation in excess
of $100,000 during the most recently completed fiscal year. The listed
individuals are hereinafter referred to as the "2004 Executive Officers".
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Name and Principal Year Salary Bonus Other Securities Restricted LTIP All Other
Position ended (US$) (US$) Annual Underlying Shares or Payouts Compen-
March 31, Compen- Options/ Restricted (US$) sation
sation SARs Share
(US$) Granted Units
---------------------- --------- ------- -------- ---------- ----------- ------------ -------- ----------
Dr. Yaffa Beck, 2005 42,675 -- 7,075 1,828,692 -- -- --
President and Chief
Executive Officer and
Director
Yoram Drucker, Chief 2005 19,457 -- 3,720 685,760 -- -- --
Operating Officer
David Stolick, Chief 2005 18,872 -- 349 400,000 -- -- --
Financial Officer
Dr. Irit Arbel, 2005 -- -- -- -- -- -- --
Director and Former
President
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth for our 2004 Executive Officers, certain
information concerning the number of stock options granted in the fiscal year
ended March 31, 2005.
Name Number of Securities Percent of total Exercise or base price ($/Sh) Expiration Date
Underlying options/SARs granted
Options/SARs granted to employees in
(#) fiscal year
----------------- -------------------- --------------------- ------------------------------- -------------------
Dr. Yaffa Beck, 1,828,692 60.76 0.15 November 8, 2014
President and
Chief Executive
Officer and
Director
Yoram Drucker, 685,760 22.79 0.15 November 16, 2014
Chief Operating
Officer
David Stolick, 400,000 13.29 0.75 February 13, 2005
Chief Financial
Officer
Dr. Irit Arbel, -- -- -- N/A
Director and
Former President
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND 2005 FISCAL YEAR END OPTION
VALUES
The following table sets forth for our 2004 Executive Officers, certain
information concerning the number of shares subject to both exercisable and
unexercisable stock options as of March 31, 2005.
Number of Securities Underlying Value of Unexercised In-the
Unexercised Options/SARs at -Money Options/SARs at FY-
FY-End (#) end ($)
Shares Aggregate
Acquired on Value Exercisable / Exercisable / Unexercisable
Name Exercise (#) Realized Unexercisable
Exercisable Unexercisable Exercisable Unexercisable
------------------ ----------- ------------ ------------ -------------- ------------ -------------
Dr. Yaffa Beck, -- -- 203,188 1,625,504 536,416 4,291,331
President and Chief
Executive Officer
and Director
Yoram Drucker, Chief -- -- 76,195 609,565 201,155 1,609,252
Operating Officer
David Stolick, Chief -- -- 11,111 388,889 22,666 793,334
Financial Officer
Dr. Irit Arbel, -- -- -- -- N/A N/A
Director and Former
President
REPRICING OF OPTIONS/SARS
We did not reprice any options during fiscal year ended March 31, 2005.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
We have no long-term incentive plans, other than the Stock Incentive Plans
described below.
STOCK INCENTIVE PLANS
In November 2004 and February 2005, the Company's Board of Directors adopted and
ratified the 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.
Under the Global Plan, we granted a total of 3,009,452 options with various
exercise prices (a weighted average exercise price of $0.249) and expiration
dates, to officers and employees. Under the U.S. Plan we have reserved for
issuance an additional 500,000 shares of restricted stock for grants to
Scientific Advisory Board members and consultants. Furthermore, we expect to
issue 100,000 options and 200,000 restricted shares in accordance with the
compensation of directors that we recently adopted as set forth below.
As at March 31, 2005, there were 6,134,010 shares available for issuance
pursuant to the Plans, not including the 500,000 shares of restricted stock for
Scientific Advisory Board members and one consultant nor does it include the
100,000 options and 200,000 restricted shares to be issued in accordance with
the compensation of directors that we recently adopted as set forth below.
COMPENSATION OF DIRECTORS
We reimburse our directors for reasonable travel and other out-of-pocket
expenses incurred in connection with attending board meetings. In fiscal year
2005 we did not pay our directors any compensation, but on May 27, 2005, we
approved the following compensation for non-employee directors beginning for
fiscal year 2006: annual retainer of $10,000; meeting participation fees of
$1,000 for each board meeting or duly constituted committee thereof attended in
person and $500 for each meeting attended by telephone. In addition, as initial
compensation, two of our non-employee directors were granted 100,000 restricted
shares, which are subject to the Company's right to repurchase at a purchase
price of par value ($0.00005), which repurchase right expires in 3 equal annual
installments beginning on May 27, 2006, and one of our non-employee directors
was granted an option to purchase 100,000 shares of our common stock, at an
exercise price of $0.75, vesting in three (3) equal annual installments
beginning on May 27, 2006 .
EXECUTIVE EMPLOYMENT AGREEMENTS
Dr. Yaffa Beck. Pursuant to her employment agreement dated November 8, 2004 (the
"Beck Effective Date"), Dr. Beck is entitled to an initial base salary of $8,000
per month, which shall be increased six (6) months subsequent to the Beck
Effective Date to $12,000 per month. Dr. Beck will also be entitled to an annual
bonus in connection with the achievement of milestones and/or objectives, in
each case as determined by the Board of Directors. In addition, within a 10 day
period following the 12 month anniversary of the Beck Effective Date, she will
receive an additional bonus as determined by the Board of Directors of at least
$50,000.
Dr. Beck will receive the following executive benefits: 22 vacation days per
year, a manager's insurance policy, contributions to her continuing education
fund, a company car and a cell phone. Dr. Beck will also be entitled to coverage
under our Directors and Officers' liability insurance policy and to a written
undertaking from the Company and its subsidiary to indemnify and release her to
the full extent possible in accordance with the Israeli Companies Law 5759-1999
and the applicable laws of the State of Washington.
Pursuant to her employment agreement and the Company's Global Plan, Dr. Beck was
granted options to purchase 1,828,692 shares of our Common Stock at a price per
share of $0.15, which options began to vest and become exercisable in thirty-six
equal monthly installments from the Beck Effective Date. In addition, two years
from the Beck Effective Date, Dr. Beck will be entitled to receive an additional
stock option grant to purchase the number of shares of our Common Stock that
represents two percent (2%) of our issued and outstanding share capital as of
that date at a price per share of $0.15, which additional options shall vest and
become exercisable in thirty-six monthly installments commencing as of such
date. Each of these options are/shall be exercisable by Dr. Beck for a ten (10)
year period following the Beck Effective Date, but in any case not later than
four (4) years after termination of her employment agreement.
Dr. Beck's employment agreement has no stated term and is terminable by either
party upon 90 days prior notice or by the Company with 30 days prior notice in
the event of a termination for cause (including a 15 day opportunity to cure).
In the event that the Company terminates Dr. Beck's employment without cause, or
in the event that Dr. Beck resigns as a result of constructive discharge, she is
entitled to receive 6 months' severance pay, based on her then-current base
salary, payable over the 6-month period following termination. Dr. Beck is
prohibited, during the term of her employment and for a period of 12 months
thereafter, from competing with the Company or its subsidiary or soliciting any
of the Company's or its subsidiary's customers or employees. Moreover, Dr.
Beck's employment agreement provides that in the event that the Company
terminates Dr. Beck's employment without cause, or in the event that Dr. Beck
resigns as a result of a constructive discharge or in the event of termination
of employment by reason of Dr. Beck's disability or death, all of the remaining
unvested options granted to Dr. Beck shall vest immediately as of the notice of
termination, and Dr. Beck or her successor shall be entitled to exercise the
vested options from the date of such termination until the earlier of four (4)
years thereafter or their expiration date. In the event that Dr. Beck's
employment is terminated by reason of disability or death or within two (2)
years of the Beck Effective Date, only 67% of the remaining unvested options
shall vest immediately as of the date of the notice of termination. In the event
that the Company terminates Dr. Beck's employment with cause, she shall be
entitled to exercise the options vested as of the date of the notice of
termination until 12 months following such date.
Yoram Drucker. Pursuant to his employment agreement dated November 16, 2004 (the
"Drucker Effective Date") Mr. Drucker is entitled to an initial base salary of
$4,000 per month, which shall be increased six (6) months subsequent to the
Drucker Effective Date to $6,000 per month. Mr. Drucker shall be employed on a
part-time basis. Drucker will be entitled to an annual bonus in connection with
the achievement of milestones and/or objectives, in each case as determined by
the Board of Directors.
Mr. Drucker will receive the following executive benefits: 14 vacation days per
year, a manager's insurance policy, contributions to his continuing education
fund, a company car and a cell phone. Mr. Drucker will also be entitled to
coverage under our Directors and Officers' liability insurance policy and to a
written undertaking from the Company and its subsidiary to indemnify and release
him to the full extent possible in accordance with the Israeli Companies Law
5759-1999 and the applicable laws of the State of Washington.
Pursuant to his employment agreement and the Company's Global Plan, Mr. Drucker
was granted options to purchase 685,760 shares of our Common Stock at a price
per share of $0.15, which options began to vest and become exercisable in
thirty-six equal monthly installments from the Drucker Effective Date. These
options are exercisable by Mr. Drucker for a ten (10) year period following the
Drucker Effective Date, but in any case not later than four (4) years after
termination of the Agreement.
Mr. Drucker's employment agreement has no stated term and is terminable by
either party upon 90 days prior notice or by the Company with 30 days prior
notice in the event of a termination for cause (including a 15 day opportunity
to cure). Mr. Drucker is prohibited, during the term of his employment and for a
period of 12 months thereafter, from competing with the Company or its
subsidiary or soliciting any of the Company's or its subsidiary's customers or
employees. Moreover, Mr. Drucker's employment agreement provides that in the
event that the Company terminates his employment without cause, or in the event
that Mr. Drucker resigns as a result of a constructive discharge or in the event
of termination of employment by reason of his disability or death, all of the
remaining unvested options granted to Mr. Drucker shall vest immediately as of
the notice of termination, and Mr. Drucker or his successor shall be entitled to
exercise the vested options from the date of such termination until the earlier
of four (4) years thereafter or their expiration date. In the event that Mr.
Drucker's employment is terminated by reason of disability or death or within
two (2) years of the Drucker Effective Date, only 67% of the remaining unvested
options shall vest immediately as of the date of the notice of termination. In
the event that the Company terminates Mr. Drucker's employment with cause, he
shall be entitled to exercise the options vested as of the date of the notice of
termination until 12 months following such date.
David Stolick. Pursuant to his employment agreement effective as of February 13,
2005 (the "Stolick Effective Date"), Mr. Stolick is entitled to an initial base
salary of 20,000 New Israeli Shekel (NIS) per month, which shall be increased
six (6) months subsequent to the Stolick Effective Date, to NIS 28,000 per
month. Mr. Stolick shall be employed on a part-time basis for the period of six
months from the Stolick Effective Date, and on a full-time basis thereafter. Mr.
Stolick was granted, pursuant to the Company's Global Plan, options to purchase
400,000 shares of the Company's common stock at a price per share of $0.75 each,
which options will vest and become exercisable in thirty-six equal monthly
installments from the Stolick Effective Date. These options shall be exercisable
by Mr. Stolick for a ten (10) year period following the Stolick Effective Date,
but in any case not later than two (2) years after termination of the Agreement.
Mr. Stolick is entitled to receive the following executive benefits: 18 vacation
days per year, a manager's insurance policy, contributions to an education fund,
a company car and a cell phone. Mr. Stolick will also be entitled to coverage
under the Company's Directors' and Officers' liability insurance policy and to a
written undertaking from the Company and its subsidiary to indemnify and release
him to the full extent possible in accordance with the Israeli Companies Law
5759-1999 and the applicable laws of the State of Washington.
Mr. Stolick's employment agreement has no stated term and is terminable by
either party upon 90 days prior notice or by the Company without prior notice in
the event of a termination for cause. In the event that Mr. Stolick resigns as a
result of constructive discharge, or in the event of termination of employment
by reason of Mr. Stolick's disability or death, 67% of the remaining unvested
options granted to Mr. Stolick shall vest immediately as of the date of the
notice of termination, and Mr. Stolick or his successor shall be entitled to
exercise the vested options from the date of such termination until the earlier
of two (2) years thereafter or their expiration date. Mr. Stolick is prohibited,
during the term of his employment and for a period of 12 months thereafter, from
competing with the Company or its subsidiary or soliciting any of the Company's
or its subsidiary's customers or employees.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information with regard to the beneficial
ownership of the (i) each of the Company's current directors, (ii) each of its
executive officers, (iii) all of its directors and officers as a group, and (iv)
each person known by the Company to own beneficially more than five percent (5%)
of the outstanding shares of the Company's common stock. Unless otherwise
indicated, management believes that the persons named in the table below, based
on information furnished by such owners, have sole voting and investment power
with respect to the common stock beneficially owned by them, subject to
community property laws, where applicable.
Shares Beneficially Owned*
Number Percent
Yaffa Beck (1) 304,782 1.09%
Yoram Drucker (2) 514,293 1.85
David Stolick (3) 33,333 0.12
Irit Arbel (4) 2,300,000 8.29
Michael Ben Ari - -
Robert Shorr - -
All directors and executive officers
as a group (5 persons) (5) 3,152,408 11.08
Zegal & Ross Capital (6) 2,600,000 9.37
Basad Holdings Ltd. (7) 1,610,000 5.8
Shareholder group (8) 7,254,293 25.80
-----------------------------------------
* Gives effect to the shares of common stock issuable upon the exercise of
all options exercisable within 60 days of March 31, 2005 and other rights
beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect
to shares. Percentage ownership is calculated based on shares of our
20,867,808 shares of Common Stock outstanding as of March 31, 2005.
(1) Consists of currently exercisable options to purchase 304,782 shares of
common stock at an exercise price of $0.15.
(2) Consists of 400,000 shares and currently exercisable options to purchase
114,293 shares of common stock at an exercise price of $0.15. Mr. Drucker
is also considered to be a member of a group within the meaning of Section
13(d)(3) of the Securities Exchange Act (see note 8 below). Other than the
Lock-up agreements described below, the members of the group have not
entered into any agreement relating to the acquisition, disposition or
voting of such shares.
(3) Consists of currently exercisable options to purchase 33,333 shares of
common stock at an exercise price of $0.75.
(4) Dr. Arbel is also considered to be a member of a group within the meaning
of Section 13(d)(3) of the Securities Exchange Act (see note 8 below). The
members of the group have not entered into any agreement relating to the
acquisition, disposition or voting of such shares. Dr. Arbel's address is
6 Hadison Street, Jerusalem, Israel.
(5) Includes: Yaffa Beck, Yoram Drucker, David Stolick, Irit Arbel, Michael
Ben Ari, and Robert Shorr.
(6) The principal address of Zegal & Ross Capital is 1748 54th Street
Brooklyn, New York 11204. (7) The principal address of Basad Holdings Ltd.
is 55 Ameer Avenue Suite 9050 Ontario Canada M6A2Z1.
(8) Information is based on Schedule 13Ds received by the Company from the
following persons indicating beneficial ownership of the following number
of shares, respectively: Irit Arbel (2,300,000), Inon Barnea (40,000),
Jonatan Berlin (300,000), Yoram Drucker (400,000), Ilan Drucker (300,000),
Rachel Even (460,000), Gil Mastey (190,000), Iris Nehorai (700,000), Ilana
Nehorai (750,000), Elazar Nehorai (700,000) Osnat Reuveni (700,000), Erez
Schwartz (300,000). The Schedule 13Ds indicate that (i) such persons are
considered to a group within the meaning of Section 13(d)(3) of the
Securities Exchange Act; (ii) the members of the group have not entered
into any agreement relating to the acquisition, disposition or voting of
such shares and (iii) each person has sole voting and dispositve power
with respect to his or her shares. Information also includes Yoram
Drucker's currently exercisable options to purchase 114,293 shares of
common stock at an exercise price of $0.15.
Equity Compensation Plan Information
The following table summarizes certain information regarding our equity
compensation plan as of March 31, 2005:
Plan Category Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding options, for future issuance
outstanding options, warrants and rights under equity
warrants and rights compensation plans (1)
--------------------------------------- ------------------- ------------------ ----------------------
2004 Global Share Option Plan (Equity 3,009,452 $0.249 6,134,010 (2)
compensation plan approved by security
holders)
2005 U.S. Stock Option and Incentive 0(2) 0(2) 6,134,010 (2)
Plan (Equity compensation plan
approved by security holders)
Equity compensation plans not approved 0 0 0
by security holders
Total 3,009,452 6,134,010 (2)
(1) A total of 9,143,462 shares of our Common Stock were reserved for
issuance in aggregate under the Global Plan and the U.S. Plan. Any
awards granted under the Global Plan or the U.S. Plan will reduce
the total number of shares available for future issuance under the
other plan.
(2) Does not include (i) 500,000 shares of restricted stock that Company
has agreed to issue in the future pursuant to the U.S. Plan to four
scientific advisory board members and one consultant, or (ii)
100,000 options and 200,000 restricted shares to be issued in
accordance with the compensation of directors that we recently
adopted as described further in Item 10 below, as the actual
issuance of these shares/options has yet to take place.
Lock-up Agreements
On March 21, 2005, we entered into lock-up agreements 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. Under
these lock-up agreements, these security holders may not transfer these
securities to anyone other than permitted transferees without the prior consent
of our 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 (24) month period following July 8, 2004 (the date of our research
and license agreement with Ramot at Tel Aviv University Ltd.) and (ii) fifteen
percent (15%) of the securities shall be restricted from transfer for the twelve
(12) month period following July 8, 2004.
Item 12. Certain Relationships and Related Transactions.
Except as otherwise indicated below, we have not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $60,000, and in which, to its knowledge, any of its directors,
officers, five percent beneficial security holder, or any member of the
immediate family of the foregoing persons has had or will have a direct or
indirect material interest.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Description
Number ------------
------
3.i Articles of Incorporation (incorporated by reference to Registration
Statement on Form S-1 dated May 24, 2001).
3.i.01 Articles of Amendment to the Articles of Incorporation, dated as of
November 15, 2004 (incorporated by reference to Current Report on Form 8-K
dated November 18, 2004.)
3(ii) By-laws (incorporated by reference to Registration Statement on Form
S-1 dated May 24, 2001).
4.01 Form of Warrant to purchase common stock for $1.50 per share dated as of
October 2004 issued to certain buyers pursuant to Common Stock Purchase
Agreement with certain buyers (incorporated by reference to Current Report
on Form 8-K dated October 22, 2004).
4.02 Form of Warrant to purchase common stock for $2.50 per share dated as of
October 2004 issued to certain buyers pursuant to Common Stock Purchase
Agreement with certain buyers (incorporated by reference to Current Report
on Form 8-K dated October 22, 2004).
4.05 Warrant to purchase common stock dated as of December 23, 2004 issued to
Malcolm E. Taub (incorporated by reference to Current Report on form 8-K
dated December 23, 2004).
4.06 Warrant to purchase common stock dated as of December 23, 2004 issued to
Ernest Muller (incorporated by reference to Current Report on form 8-K
dated December 23, 2004).
4.07 Form of Warrant to purchase common stock dated as of November 4, 2004
issued pursuant to Research and License Agreement with Ramot at Tel-Aviv
University Ltd. (incorporated by reference to Amendment No. 1 to Current
Report on Form 8-K/A dated November 4, 2004, filed on February 14, 2005).
4.08 Form of Warrant to purchase common stock dated as of November 4, 2004
issued pursuant to consulting agreements with Eldad Melamed and Daniel
Offen (incorporated by reference to Amendment No. 1 to Current Report on
Form 8-K/A dated November 4, 2004, filed on February 14, 2005).
10.01 Restricted Stock Purchase Agreement, dated as of April 28, 2003, between
certain buyers and Michael Frankenberger (incorporated by reference to
Current Report on Form 8-K dated May 21, 2004).
10.02 Letter of Intent, dated as of April 30, 2004, with Ramot at Tel-Aviv
University Ltd. (incorporated by reference to Current Report on Form 8-K
dated May 21, 2004).
10.03 Research and License Agreement, dated as of July 8, 2004, between Ramot at
Tel-Aviv University Ltd. and the Company (incorporated by reference to
Current Report on Form 8-K dated July 8, 2004).
10.04 Consulting Agreement, dated as of July 8, 2004, between Professor Eldad
Melamed and the Company (incorporated by reference to Current Report on
Form 8-K dated July 8, 2004).
10.05 Consulting Agreement, dated as of July 8, 2004, between Professor Daniel
Offen and the Company (incorporated by reference to Current Report on Form
8-K dated July 8, 2004).
10.06 Common Stock Purchase Agreement and Subscription Agreement, dated as of
October 22, 2004, between certain buyers and the Company (incorporated by
reference to Current Report on Form 8-K dated October 22, 2004).
10.07 Employment agreement, dated as of November 8, 2004, between Yaffa Beck and
the Company (incorporated by reference to Current Report on Form 8-K dated
November 4, 2004).
10.08 Employment agreement, dated as of November 16, 2004, between Yoram Drucker
and the Company (incorporated by reference to Current Report on Form 8-K
dated November 16, 2004).
10.09 Consulting agreement, dated as of December 23, 2004, between Malcolm E.
Taub and the Company (incorporated by reference to Current Report on Form
8-K dated December 23, 2004).
10.10 Consulting agreement, dated as of December 23, 2004, between Ernest Muller
and the Company (incorporated by reference to Current Report on Form 8-K
dated December 23, 2004).
10.11 Employment agreement, dated as of January 16, 2005, between David Stolick
and the Company (incorporated by reference to Current Report on Form 8-K
dated January 16, 2005).
10.12 Lease Agreement, dated as of December 1, 2004, between Brainstorm Cell
Therapeutics Ltd. and Kiryat HaMada VeHaTechnologia `A' Petach Tikva Ltd.,
Kiryat HaMada VeHaTechnologia `B' Petach Tikva Ltd., and Otzma & Co.,
Investment Maccabim Ltd. (incorporated by reference to Quarterly Report on
Form 10-QSB for the quarterly period ended December 31, 2004).
10.13 Lock-up Agreement, dated as of March 21, 2005, between certain security
holders and the Company (incorporated by reference to Current Report on
Form 8-K dated March 21, 2005).
10.14 2004 Global Share Option Plan and its Israeli Appendix A (incorporated by
reference to Current Report on Form 8-K dated March 28, 2005).
10.15 2005 U.S. Stock Option and Incentive Plan (incorporated by reference to
Current Report on Form 8-K dated March 28, 2005).
10.16 Option Agreement, dated as of December 31, 2004, between Yaffa Beck and
the Company (incorporated by reference to Current Report on Form 8-K dated
March 28, 2005).
10.17 Option Agreement, dated as of December 31, 2004, between Yoram Drucker and
the Company (incorporated by reference to Current Report on Form 8-K dated
March 28, 2005).
10.18 Option Agreement, dated as of December 31, 2004, between David Stolick and
the Company (incorporated by reference to Current Report on Form 8-K dated
March 28, 2005).
31.1 Certification by the Principal Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Item 14. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed and accrued by Kost Forer Gabbay & Kasierer, a member
of Ernst & Young Global, for professional services rendered for the audit of our
annual financial statements included in our Annual Report on Form 10-KSB for the
fiscal year ending March 31, 2005 and for the review of quarterly financial
statements included in our Quarterly Reports on Form 10-QSB for the quarters
ending September 30, 2004 and December 31, 2004 were $55,000. The aggregate fees
billed and accrued by Manning Elliott, our former auditors, for review of the
quarterly financial report ending June 30, 2004 were $ 4,600. The aggregate fees
billed by Manning Elliott, for services rendered for our annual financial
statements included in our Annual Report and for review of Quarterly Reports for
the year ended March 31, 2004 was $5,625.
All Other Fees
For the fiscal year ended March 31, 2005, the aggregate fees billed for other
services by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, not
relating to the performance of the audit of our financial statements which are
not reported under the caption "Audit Fees" above, was $3,500, and for the
fiscal year ended March 31, 2004, Nil. The fees reported under this caption
include consulting services provided with respect to financial and accounting
aspects of the Plans.
We do not use Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,
for financial information system design and implementation. These services,
which include designing or implementing a system that aggregates source data
underlying the financial statements or generates information that is significant
to our financial statements, are provided internally or by other service
providers. We do not engage Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global, to provide compliance outsourcing services.
The Board of Directors pre-approves all services provided by our independent
auditors. All of the above services and fees were reviewed and approved by the
Board before the services were rendered.
The Board of Directors has considered the nature and amount of fees billed by
Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, and believes
that the provision of services for activities unrelated to the audit is
compatible with maintaining Kost Forer Gabbay & Kasierer's independence.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BRAINSTORM CELL THERAPEUTICS INC.
(formerly GOLDEN HAND RESOURCES INC.)
Date: June 6, 2005 By: /s/ Yaffa Beck
----------------------------------------
Name: Yaffa Beck
Title: President & CEO (Principal
Executive Officer)
Date: June 6, 2005 By: /s/ David Stolick
----------------------------------------
Name: David Stolick
Title: Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
----------------------- -------------------------------- --------------
/s/ Yaffa Beck President & CEO and Director June 6, 2005
-----------------------
Yaffa Beck
/s/ David Stolick Chief Financial Officer June 6, 2005
-----------------------
David Stolick
/s/ Irit Arbel Director June 6, 2005
-----------------------
Irit Arbel
/s/ Michael Greenfield Director June 6, 2005
-----------------------
Michael Greenfield (Ben-Ari)
/s/ Robert Shorr Director June 6, 2005
-----------------------
Robert Shorr
INDEX TO EXHIBITS
Exhibit Description
Number -----------
--------
3.i Articles of Incorporation (incorporated by reference to Registration
Statement on Form S-1 dated May 24, 2001).
3.i.01 Articles of Amendment to the Articles of Incorporation, dated as of
November 15, 2004 (incorporated by reference to Current Report on Form 8-K
dated November 18, 2004.)
3(ii) By-laws (incorporated by reference to Registration Statement on Form
S-1 dated May 24, 2001).
4.01 Form of Warrant to purchase common stock for $1.50 per share dated as of
October 2004 issued to certain buyers pursuant to Common Stock Purchase
Agreement with certain buyers (incorporated by reference to Current Report
on Form 8-K dated October 22, 2004).
4.02 Form of Warrant to purchase common stock for $2.50 per share dated as of
October 2004 issued to certain buyers pursuant to Common Stock Purchase
Agreement with certain buyers (incorporated by reference to Current Report
on Form 8-K dated October 22, 2004).
4.05 Warrant to purchase common stock dated as of December 23, 2004 issued to
Malcolm E. Taub (incorporated by reference to Current Report on form 8-K
dated December 23, 2004).
4.06 Warrant to purchase common stock dated as of December 23, 2004 issued to
Ernest Muller (incorporated by reference to Current Report on form 8-K
dated December 23, 2004).
4.07 Form of Warrant to purchase common stock dated as of November 4, 2004
issued pursuant to Research and License Agreement with Ramot at Tel-Aviv
University Ltd. (incorporated by reference to Amendment No. 1 to Current
Report on Form 8-K/A dated November 4, 2004, filed on February 14, 2005).
4.09 Form of Warrant to purchase common stock dated as of November 4, 2004
issued pursuant to consulting agreements with Eldad Melamed and Daniel
Offen (incorporated by reference to Amendment No. 1 to Current Report on
Form 8-K/A dated November 4, 2004, filed on February 14, 2005).
10.01 Restricted Stock Purchase Agreement, dated as of April 28, 2003, between
certain buyers and Michael Frankenberger (incorporated by reference to
Current Report on Form 8-K dated May 21, 2004).
10.02 Letter of Intent, dated as of April 30, 2004, with Ramot at Tel-Aviv
University Ltd. (incorporated by reference to Current Report on Form 8-K
dated May 21, 2004).
10.03 Research and License Agreement, dated as of July 8, 2004, between Ramot at
Tel-Aviv University Ltd. and the Company (incorporated by reference to
Current Report on Form 8-K dated July 8, 2004).
10.04 Consulting Agreement, dated as of July 8, 2004, between Professor Eldad
Melamed and the Company (incorporated by reference to Current Report on
Form 8-K dated July 8, 2004).
10.05 Consulting Agreement, dated as of July 8, 2004, between Professor Daniel
Offen and the Company (incorporated by reference to Current Report on Form
8-K dated July 8, 2004).
10.06 Common Stock Purchase Agreement and Subscription Agreement, dated as of
October 22, 2004, between certain buyers and the Company (incorporated by
reference to Current Report on Form 8-K dated October 22, 2004).
10.07 Employment agreement, dated as of November 8, 2004, between Yaffa Beck and
the Company (incorporated by reference to Current Report on Form 8-K dated
November 4, 2004).
10.08 Employment agreement, dated as of November 16, 2004, between Yoram Drucker
and the Company (incorporated by reference to Current Report on Form 8-K
dated November 16, 2004).
10.09 Consulting agreement, dated as of December 23, 2004, between Malcolm E.
Taub and the Company (incorporated by reference to Current Report on Form
8-K dated December 23, 2004).
10.10 Consulting agreement, dated as of December 23, 2004, between Ernest Muller
and the Company (incorporated by reference to Current Report on Form 8-K
dated December 23, 2004).
10.11 Employment agreement, dated as of January 16, 2005, between David Stolick
and the Company (incorporated by reference to Current Report on Form 8-K
dated January 16, 2005).
10.12 Lease Agreement, dated as of December 1, 2004, between Brainstorm Cell
Therapeutics Ltd. and Kiryat HaMada VeHaTechnologia `A' Petach Tikva Ltd.,
Kiryat HaMada VeHaTechnologia `B' Petach Tikva Ltd., and Otzma & Co.,
Investment Maccabim Ltd. (incorporated by reference to Quarterly Report on
Form 10-QSB for the quarterly period ended December 31, 2004).
10.13 Lock-up Agreement, dated as of March 21, 2005, between certain security
holders and the Company (incorporated by reference to Current Report on
Form 8-K dated March 21, 2005).
10.14 2004 Global Share Option Plan and its Israeli Appendix A (incorporated by
reference to Current Report on Form 8-K dated March 28, 2005).
10.15 2005 U.S. Stock Option and Incentive Plan (incorporated by reference to
Current Report on Form 8-K dated March 28, 2005).
10.16 Option Agreement, dated as of December 31, 2004, between Yaffa Beck and
the Company (incorporated by reference to Current Report on Form 8-K dated
March 28, 2005).
10.17 Option Agreement, dated as of December 31, 2004, between Yoram Drucker and
the Company (incorporated by reference to Current Report on Form 8-K dated
March 28, 2005).
10.18 Option Agreement, dated as of December 31, 2004, between David Stolick and
the Company (incorporated by reference to Current Report on Form 8-K dated
March 28, 2005).
31.1 Certification by the Principal Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.