News Column

BRAINSTORM CELL THERAPEUTICS INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

August 12, 2014

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly 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 under "Risk Factors" in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2013. In some cases you can identify such "forward-looking statements" by the use of words 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. ("we," "us," "our" or the "Company") is a biotechnology company developing novel adult stem cell therapies for debilitating neurodegenerative disorders such as Amyotrophic Lateral Sclerosis ("ALS", also known as Lou Gehrig's disease), Multiple Sclerosis ("MS"), and Parkinson's disease ("PD"). These diseases have limited treatment options and as such represent unmet medical needs.

We believe that NurOwn, our proprietary process for the propagation of Mesenchymal Stem Cells ("MSC") and their differentiation into NeuroTrophic factor-("NTF") secreting cells ("MSC-NTF"), and their transplantation at, or near, the site of damage, offers the hope of more effectively treating neurodegenerative diseases.

Our approach is considered safe based on our use of autologous cells, which are free of the risk of rejection, and MSC are known to be safe with no risk of tumor formation. Our use of adult stem cells is also free of the controversy associated with the use of embryonic stem cells in some countries.

Our core technology was developed in collaboration with prominent neurologist Prof. Eldad Melamed, former head of Neurology of the Rabin Medical Center and member of the Scientific Committee of the Michael J. Fox Foundation for Parkinson's Research, and expert cell biologist Prof. Daniel Offen of the Felsenstein Medical Research Center of Tel Aviv University.

Our wholly-owned Israeli subsidiary, Brainstorm Cell Therapeutics Ltd. (the "Israeli Subsidiary"), holds rights to commercialize the technology, through a licensing agreement with Ramot at Tel Aviv University Ltd. ("Ramot"), the technology transfer company of Tel Aviv University, Israel.

On February 8, 2010, our Israeli Subsidiary entered into an agreement with Hadasit Medical Research Services and Development Ltd., a subsidiary of the Hadassah Medical Organization ("Hadassah"), pursuant to which Hadassah provides the Israeli Subsidiary with lab services.

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On February 17, 2010, our Israeli Subsidiary entered into an agreement with Hadassah and Professor Dimitrios Karussis (the "Clinical Trial Agreement"). Under the Clinical Trial Agreement, Hadassah and our personnel agreed to conduct a clinical trial to evaluate the safety and tolerability of our NurOwn cells in patients with ALS, in accordance with a protocol developed jointly by us and Professor Karussis.

In February 2011, the U.S. Food and Drug Administration ("FDA") granted Orphan Drug designation to NurOwn for the treatment of ALS.

In June 2011, we initiated a Phase I/II clinical trial for the treatment of ALS with NurOwn at the Hadassah University Medical Center in Jerusalem ("HUMC") with Principal Investigator Professor Dimitrios Karussis, after receiving approval from the Israeli Ministry of Health ("MoH").

In July 2011, we entered into a Memorandum of Understanding with Massachusetts General Hospital ("MGH") and the University of Massachusetts Medical School ("UMass") in anticipation of applying for FDA approval to begin ALS human clinical trials in the United States. In March 2014, we entered into a definitive agreement with MGH in order to launch a Phase II clinical trial in the second quarter of 2014, and we expect to enter into a definitive agreement with UMass for the same.

In July 2012, together with Professor Karussis, we submitted an interim safety evaluation report to the Israeli MoH for the first 12 of 24 patients in the Phase I/II clinical trial. The report confirmed that our NurOwn therapy is safe, did not cause any adverse side effects, and some of the patients showed promising indications of clinical improvement.

In January 2013, the Israeli MoH approved a Phase IIa combined (intramuscular and intrathecal) treatment, dose-escalating trial, which we are currently conducting at HUMC. According to the protocol for this safety and preliminary efficacy trial, 12 early-stage ALS patients received both intramuscular and intrathecal injections of NurOwn cells in three cohorts with increasing doses between February and August 2013. The patients were followed for six months after transplantation. Due to medical and technical considerations, two additional patients were enrolled in the trial in late 2013, in order to preserve the originally planned protocol design. These two patients were treated by the beginning of the first quarter of 2014. The final report for the study is expected after completion of the 6 months follow up of the last two patients.

In January 2013, we successfully completed a 12-week repeat dose toxicity study with our NurOwn cells in mice. These repeat doses were prepared from frozen cells, using a proprietary method recently developed by the Company. We believe that our cryopreservation, or freezing, method will enable long-term storage, and production of repeat patient doses of NurOwn without the need for additional bone marrow aspirations. We believe that the positive data from the toxicity study in mice will support our efforts to obtain approval for a future repeat dose clinical study in ALS patients. The study was conducted at Harlan Israel's laboratories, according to Good Laboratory Practice ("GLP") standards of the FDA. The study protocol was approved by Israel'sNational Council for Animal Experimentation.

In March 2013, Principal Investigator Professor Dimitrios Karussis of Hadassah presented some of the data from the Phase I/II trial at the American Academy of Neurology Annual Meeting. The trial results analyzed to date confirmed the safety of the NurOwn Treatment and also demonstrated initial signs of possible efficacy. There was a slower decline in overall clinical and respiratory function, as measured by the ALS Functional Rating Score ("ALSFRS-R") and Forced Vital Capacity ("FVC") score respectively, in the six patients that received an intrathecal injection of the cells, in the six months following treatment as compared to the three months preceding treatment.

On March 14, 2013, we entered into a Memorandum of Understanding with the Mayo Clinic ("Mayo") in Rochester, Minnesota, to participate as an additional clinical site in the multi-center Phase II ALS clinical trial in the USA. The team there will be led by Professor Anthony J. Windebank, Head of the Regenerative Neurobiology Laboratory in the Department of Neurology. In January 2014 we announced that we had entered into a definitive agreement with Mayo to conduct the trial and manufacture NurOwn cells in their cell processing cleanroom facility.

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Effective April 3, 2013, our Israeli Subsidiary entered into a manufacturing agreement with Dana-Farber Cancer Institute ("Dana-Farber") under which Dana-Farber's Connell and O'Reilly Cell Manipulation Core Facility will produce NurOwn in its cGMP-compliant clean rooms for the MGH and UMass clinical sites during our upcoming Phase II ALS clinical trial in the United States.

In June 2013, we entered into a Memorandum of Understanding ("MOU") with PRC Clinical, a Contract Research Organization ("CRO") based in the San Francisco Bay Area, in anticipation of our planned Phase II multi-center ALS clinical trial in the United States.

On July 17, 2013, we received Orphan Medicinal Product Designation for our NurOwn for the treatment of ALS from the European Commission.

On August 1, 2013 we announced that we submitted a favorable safety report to the hospital Helsinki Committee (IRB) for the second group of (four) patients in our ongoing Phase IIa ALS clinical trial at the Hadassah Medical Center in Jerusalem, Israel. We announced that the treatment was well tolerated and no serious adverse events were observed. Except for one SAE (Serious Adverse Event, death due to cardiopulmonary arrest) that was reported as non-treatment related.

In September 2013, we completed treatment of the 12 patients in our ALS Phase IIa NurOwn dose-escalating clinical trial. We have been informed that one patient in the study expired due to a medical condition unrelated to the Clinical Trial.

In October 2013, we launched our activities in the US in preparation for our Phase IIa multi-center clinical trial, with the initiation of the NurOwn™ technology transfer process at the Dana Farber Cancer Institute (DFCI). This process was completed on March 31, 2014.

On December 10, 2013, Prof. Karussis presented some of his preliminary findings from our ALS Phase IIa NurOwn dose-escalating clinical trial at the 24th International Symposium on ALS/MND the previous week in Milan, Italy. According to Prof. Karussis, the safety data are "impressively positive," with only minimal and transient (procedure related) adverse events, even though the patients in this study were injected both intrathecally and intramuscularly with up to double the dose of NurOwn cells given in the Phase I trial. In addition, a number of patients showed some initial indications of clinical improvement.

In December 2013 the Company submitted an Investigational New Drug ("IND") application to the FDA.

On December 4, 2013, a Notice of Intention to Grant from the European Patent Office (EPO) was issued for the Company's patent application entitled "Isolated Cells and Populations Comprising Same for the Treatment of CNS Diseases" (European serial number EP06766101.7) . This patent relates to the production method for the company's proprietary stem cells induced to secrete large quantities of neurotrophic factors for the treatment of neurodegenerative diseases.

On February 11, 2014, a Notice of Allowance was issued from the U.S. Patent Office for the same patent application as above, U.S. serial number 11/727,583.

On March 24, 2014, the Company's wholly owned subsidiary BrainStorm Cell Therapeutics Ltd. entered into a clinical trial agreement with The General Hospital Corporation d/b/a Massachusetts General Hospital (MGH), to conduct a Phase II clinical trial of the Company's NurOwn™ in amyotrophic lateral sclerosis (ALS), pending FDA and Institutional Review Board approvals.

In March 2014, the U.S. Patent and Trademark Office granted the Company a key patent for its autologous stem cell technology. The patent covers the Company's stem cells induced to secrete elevated levels of neurotrophic factors for the treatment of neurodegenerative diseases.

On April 10, 2014 the U.S. Patent and Trademark Office granted the Company an additional patent for its autologous stem cell technology. The patent covers the production method of the Company's proprietary stem cells induced to secrete significantly elevated levels of neurotrophic factors for the treatment of neurodegenerative diseases.

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On April 28, 2014 the US Food and Drug Administration (FDA) approved commencement of its Phase II clinical trial with NurOwn™ in patients with Amyotrophic Lateral Sclerosis (ALS). The trial will be launched initially at the Massachusetts General Hospital (MGH) in Boston, MA and the University of Massachusetts Memorial (UMass) Hospital in Worcester, MA, following Institutional Review Board (IRB) approvals.

On June 2, 2014, the Company announced the interim results from the Company's Phase IIa ALS trial conducted at Hadassah Medical Center in Jerusalem, Israel as presented by Principal Investigator Professor Dimitrios Karussis. The positive safety and preliminary efficacy results observed in this study are consistent with results observed in the Company's previous Phase I/II trial. Between these two studies, a total of 26 patients have been treated with NurOwn™, the Company's stem cell therapy candidate for ALS.

Prof. Karussis summarized the results from both phases of the ALS clinical trial, and presented an interim analysis of the data for the first 10 out of 14 patients in the current Phase IIa trial. Results from the last four patients will be analyzed following completion of their six month follow-up period. In all 26 patients who received NurOwn™ in the two trials, no treatment-related serious adverse events were observed. In the three month pre-treatment "run-in" period, 71% of the patients showed progression of disease with decline in neurological function. In contrast, in the three months post-transplantation with NurOwn™, 63% of the patients who received intrathecal (IT), or combined (IT) and intramuscular (IM) administration, showed stabilization or improvement in neurological function, as measured by their revised ALS functional rating score (ALSFRS-R). According to Prof. Karussis, these differences in the preliminary analysis were statistically significant at p=0.035, chi-square test.

On June 6, 2014, the Company announced that its Phase II ALS clinical trial has commenced with the enrollment of the first patient at Massachusetts General Hospital (MGH) in Boston, Massachusetts. The Company's Phase II trial is a randomized, double-blind, placebo controlled multi-center study designed to evaluate the safety and efficacy of transplantation of Autologous Mesenchymal Stem Cells Secreting Neurotrophic Factors ("MSC-NTF" or NurOwn™) in 48 ALS patients. The trial is also being conducted at the University of Massachusetts Memorial (UMass) Hospital in Worcester, Massachusetts and the Mayo Clinic in Rochester, Minnesota.

On June 10, 2014 the Company announced that it has initiated a study in a mouse model of autism at the Felsenstein Medical Research Center, Sackler Faculty of Medicine, Tel Aviv University, under the direction of Professor Daniel Offen. The study will explore the effects of the company's "MSC-NTF" cells on mouse behavior. The study, which will be conducted using the BTBR mouse model for autism, will investigate repetitive behavior, increased cognitive flexibility and improved sociability in mice after administration of a single intracerebroventricular injection of the cells.

On June 27, 2014 the Company announced that together with Octane Biotech Inc., a Canadian firm that focuses on clinical systems for cell and tissue therapy, it has successfully developed a sophisticated Alpha prototype of the NurOwn™ Bioreactor, utilizing a customized disposable cartridge that is dedicated to the intricacies of the Company's NurOwn™ process. Operating within the Cocoon™ clinical delivery platform pioneered by Octane, the Alpha prototype automates the entire NurOwn™ process for unmatched process control and production economy. Based on this first working prototype, the Company and Octane are quickly advancing to the next stage of system qualifications in anticipation of adopting all the benefits of cell production automation as quickly as possible for full clinical use.

On July 11, 2014 the Company announced the online publication of an important preclinical study in the journal Clinical and Translational Medicine. This paper describes the safety of single and repeated intramuscular administration of NurOwn, the Company's proprietary mesenchymal stem cells that are induced to secrete a variety of neurotrophic factors. The results published indicate that repeated doses of NurOwn are safe in mice and more specifically, that mice generate only minimal immune response after repeated exposure to NurOwn, which are human cells. These data are anticipated to help support the use of multiple doses of NurOwn in future clinical trials.

On July 15, 2014 the Company announced that the University of Massachusetts (UMass) Memorial Medical Center in Worcester, MA will begin enrolling patients into the Company's randomized, double-bling placebo-controlled phase 2 clinical trial in Amyotrophic Lateral Sclerosis (ALS). UMass Memorial is the second site to become active of the three sites participating in this trial.

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On July 28, 2014 the Company announced that it had received Notice of Allowance from the United States Patent Office for Patent Application 12/994,761, titled "Mesenchymal Stem Cells for the Treatment of CNS Diseases." This patent covers the use of mesenchymal stem cells that secrete elevated levels of brain-derived neurotrophic factor (BDNF) to treat diseases of the central nervous system, including but not limited to Amyotrophic Lateral Sclerosis (ALS), Parkinson's disease, Alzheimer's disease, Huntington's disease, multiple sclerosis, among others. The Patent Office recognized a priority date for this patent of May 28, 2008.

Our Proprietary Technology



Our NurOwn technology is based on a novel differentiation protocol which induces differentiation of the bone marrow-derived mesenchymal stem cells into neuron-supporting cells, MSC-NTF cells, capable of releasing several neurotrophic factors, including Glial-derived neurotrophic factor ("GDNF") and Brain-derived neurotrophic factor ("BDNF"), Vascular endothelial growth factor (VEGF) and Hepatocyte growth factor (HGF) which are critical for the growth, survival and differentiation of developing neurons. GDNF is one of the most potent survival factors known for peripheral neurons. VEGF and HGF have been reported to have important neuro-protective effects in ALS.

Our approach to treatment of neurodegenerative diseases with autologous adult stem cells includes a multi-step process beginning with harvesting of undifferentiated stem cells from the patient's own bone marrow, and concluding with transplantation of differentiated, neurotrophic factor-secreting mesenchymal stem cells (MSC-NTF) into the same patient - intrathecally and/or intramuscularly. Intrathecal (injection into the cerebrospinal fluid) transplantation consists of injection with a standard lumbar puncture; there is no need for a laminectomy - an invasive, orthopedic spine operation to remove a portion of the vertebral bone, as required by other technologies. Intramuscular (injection directly into muscle) transplantation is performed via a standard injection procedure as well.

Our proprietary, production process for induction of differentiation of human bone marrow derived mesenchymal stem cells into differentiated cells that produce NTF (MSC-NTF) for clinical use is conducted in full compliance with current Good Manufacturing Practice ("cGMP").

Our proprietary technology is licensed to and developed by our Israeli Subsidiary.

The NurOwn Transplantation Process § Bone marrow aspiration from patient; § Isolation and expansion of the mesenchymal stem cells; § Differentiation of the expanded stem cells into neurotrophic-factor secreting (MSC-NTF) cells; and § Autologous transplantation into the patient's spinal cord or muscle tissue. Differentiation before Transplantation



The ability to induce differentiation of autologous adult mesenchymal stem cells into MSC-NTF cells before transplantation is unique to NurOwn, making it the first-of-its-kind for treating neurodegenerative diseases.

The specialized cells secrete neurotrophic factors for:

§ Protection of existing motor neurons; § Promotion of motor neuron growth; and § Re-establishment of nerve-muscle interaction. 28



Autologous ("Self-transplantation")

The NurOwn approach is autologous, or self-transplanted, using the patient's own stem cells. In autologous transplantation there is no risk of rejection and no need for treatment with immunosuppressive agents, which can cause severe and/or long-term side effects. In addition, the use of adult stem cells is free of controversy associated with the use of embryonic stem cells in some countries.

Transplantation site and method

Clinical Indication I: ALS (current) - Based on the approval of the Israeli MoH, we are currently conducting a Phase IIa dose-escalating trial to evaluate safety and preliminary efficacy of NurOwn in ALS patients. Following approval of our IND application by the FDA, we have launched a Phase II clinical trial in the USA.

Future Clinical Development. Future development of NurOwn in ALS will require additional clinical trials, including the administration of repeated doses to ALS patients enrolled in those trials. The design and timing of subsequent clinical trials in ALS is currently under review by the Company. In addition, the Company is reviewing the potential clinical development of NurOwn in other neurodegenerative disorders.

Executive Officers



On June 6, 2014, the Company appointed Uri Yablonka as its Chief Operating Officer and as a member of its Board of Directors.

On June 9, 2014, the Company appointed Anthony Fiorino, M.D., Ph.D. as its Chief Executive Officer.

In connection with the appointment of Dr. Fiorino, Chaim Lebovits ceased to server as the Company's principal executive officer effective June 9, 2014. Mr. Lebovits continues to serve as the Company's President.

Corporate Information



We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 605 Third Avenue, 34th Floor, New York, New York 10158, and our telephone number is (646) 666-3188. We maintain an Internet website at http://www.brainstorm-cell.com. The information on our website is not incorporated into this report.

Results of Operations



For the period from inception (September 22, 2000) until June 30, 2014, the Company has not earned any revenues from operations. The Company does not expect to earn revenues from operations until 2017. The Company has incurred operating costs and other expenses of approximately $1,294,000 during the three months ended June 30, 2014.

Research and Development, net:

Research and development expenses, net for the three months ended June 30, 2014 and 2013 were $877,000 and $742,000, respectively. In addition, the Company's grant from The Office of the Chief Scientist increased by $18,000 to $299,000 for the three months ended June 30, 2014 from $281,000 for the three months ended June 30, 2013.

The increase in research and development expenses for the three months ended June 30, 2014 is primarily due to an increase of $405,000, associated with the clinical trials in the US, to $595,000 for the three months ended June 30, 2014, compared to $190,000 for the three months ended June 30, 2013. This increase was partially offset by a decrease of $182,000 for the clinical trials in Israel, a decrease of $43,000 in payroll costs, a decrease of $26,000 in travel and consulting fees, and an increase of $18,000 in CSO participation.

29 General and Administrative:



General and administrative expenses for the three months ended June 30, 2014 and 2013 were $417,000 and $743,000, respectively. The decrease in general and administrative expenses for the three month period ended June 30, 2014 from the three month period ended June 30, 2013 is primarily due to: (i) a decrease of $206,000 in stock-based compensation expenses, from $366,000 in the three months ended June 30, 2013 to $160,000 in the three months ended June 30, 2014; (ii) a decrease of $66,000 in payroll costs from $179,000 in the three months ended June 30, 2013 to $113,000 in the three months ended June 30, 2014, and (iii) a decrease of $54,000 for IR PR costs, travel, for rent and consulting fees and other costs, from $198,000 in the three months ended June 30, 2013 to $144,000 in the three months ended June 30, 2014.

Financial Expenses:



Financial expense for the three months ended June 30, 2014 was $690,000, compared to a financial expense of $15,000 for the three months ended June 30, 2013.

The financial expense for the three months ended June 30, 2014 is mainly due to a financial expense of $1,584,000 that is due to revaluation of certain warrants issued to investors in August 2013 public offering ("2013 Warrants"). Certain 2013 Warrants contain anti-dilution provisions. Under generally accepted accounting principles, the anti-dilution provisions require those 2013 Warrants to be valued and classified as a warrant liability on the balance sheet, resulting in a reduction of stockholders' equity. This warrant liability will be revaluated every quarter report.

On April 25, 2014 the Company exchanged some of the 2013 Warrants, entitling the holders to purchase an aggregate 11,662,059 shares of Common Stock, in exchange for 5,831,031 unregistered shares of Common Stock (the "Exchange").

On March 24, 2014ACCBT Corp. and ACC International Holdings Ltd. (together "ACCBT") agreed to irrevocably waive all anti-dilution rights contained in all issued and outstanding warrants to purchase Company common stock held by ACCBT Corp. or ACC International Holdings Ltd.

On May 25, 2014, the Company entered into a Warrant Amendment Agreement (the "Amendment") with ACCBT, pursuant to which the expiration date of each Warrant held by ACCBT was extended until November 5, 2017, in consideration of ACCBT having provided a series of waivers of their rights, including anti-dilution rights. ACCBT and the Company are party to a Subscription Agreement, dated as of July 2, 2007, a related Registration Rights Agreement and warrants to purchase up to an aggregate of 30,250,000 shares of Company Common Stock, and related documents (all of the foregoing documents together as amended to date, the "ACCBT Documents"). Pursuant to the Amendment, the ACCBT Documents were amended to reflect the extension of the warrants' expiration date.

On May 27, 2014 the Company entered into agreements with certain holders of 2013 Warrants to repurchase certain then outstanding 2013 Warrants for an aggregate of approximately $600,000 (the "Redemption"). Each share of Common Stock issuable pursuant to the repurchased 2013 Warrants was repurchased for $0.12 cash payment by the Company per Warrant Share (the "Redemption Amount") and Warrants participating in the Redemption were cancelled and of no further force and effect. In connection with the Redemption, certain holders of 2013 Warrants which did not participate in the Redemption and whose 2013 Warrants will therefore remain outstanding, have waived anti-dilution provisions of their 2013 Warrants.

The Company believes that the Exchange, the Redemption and the waivers will help facilitate the Company's plans to uplist its stock to a national securities exchange such as NASDAQ. The 2013 Warrants contained anti-dilution provisions. Under generally accepted accounting principles, the anti-dilution provisions required the 2013 Warrants to be valued and classified as a warrant liability on the balance sheet, resulting in a reduction of stockholders' equity. NASDAQ requires as part of its initial listing standards that the Company have a minimum of $5 million of stockholders' equity, which the Redemption and the waivers are anticipated to help facilitate.

30 Net Loss:



Net loss for the three months ended June 30, 2014 was $1,984,000, as compared to a net loss of $1,518,000 for the three months ended June 30, 2013. Net loss per share for the three months ended June 30, 2014 and June 30, 2013was $0.01.

The weighted average number of shares of Common Stock used in computing basic and diluted net loss per share for the three months ended June 30, 2014 was 186,253,752, compared to 152,546,703 for the three months ended June 30, 2013.

The increase in the weighted average number of shares of Common Stock used in computing basic and diluted net loss per share for the three months ended June 30, 2014 was due to (i) the issuance of shares of Common Stock in a private offering in June 2014, as described in more detail below, (ii) the exercise of options, and (iii) the issuance of shares to service providers and private investors.

Liquidity and Capital Resources

The Company has financed its operations since inception primarily through public and private sales of its Common Stock and warrants and the issuance of convertible promissory notes. At June 30, 2014, the Company had $12,207,000 in total current assets and $1,782,000 in total current liabilities.

Net cash used in operating activities was $970,000 for the three months ended June 30, 2014. Cash used for operating activities was primarily attributed to cost of clinical trials, rent of clean rooms and materials for clinical trials, payroll costs, rent, outside legal fee expenses and public relations expenses.

Net cash used in investing activities was $2,000 for the three months ended June 30, 2014.

Net cash provided by financing activities for the three months ended June 30, 2014 was $9,273,000.

On June 19, 2014, the Company, pursuant to a June 13, 2014 securities purchase agreement (the "Securities Purchase Agreement") entered into with a group of investors, including several healthcare-focused funds (the "Investors"), effected a private placement (the "Offering") of Common Stock, and warrants to purchase Common Stock. The Company received gross proceeds of $10.5 million, resulting from the issuance and sale of 42 million shares of Common Stock (the "Shares") at a price per share of $0.25. The Investors received warrants to purchase up to 42 million shares of Common Stock at an exercise price of $0.348 per share (the "Warrants"). The Warrants are exercisable immediately upon closing of the private placement and have a term of three (3) years.

In connection with the Offering, the Company entered into a Registration Rights Agreement (the "Registration Rights Agreement") at closing pursuant to which the Company agreed to file within 30 days of the Closing Date (the "Filing Deadline") a resale registration statement to register for resale the Shares and Common Stock underlying the Warrants. The Registration Statement was filed on July 10, 2014 and declared effective on July 24, 2014.

If at any time all of the shares of Common Stock or shares of Common Stock underlying the Warrants are not covered by the initial Registration Statement, the Company agreed to file with the SEC one or more additional Registration Statements so as to cover all of the shares of Common Stock and shares of Common Stock underlying the Warrants not covered by such initial Registration Statement, in each case, as soon as practicable, but in no event later than the applicable filing deadline for such additional Registration Statements as provided in the Registration Rights Agreement.

The Company intends to use the aggregate net proceeds of the Offering primarily for working capital and general corporate purposes, including relating to the Company's recently launched phase 2 amyotrophic lateral sclerosis (ALS) clinical trials.

Maxim Group LLC acted as sole placement agent for the Offering (the "Placement Agent"). In connection with the Offering, the Company paid the Placement Agent a cash fee equal to 6.9% of the gross proceeds of the Offering, as well as fees and expenses of the Placement Agent of $35,000. In addition, the Company issued to Maxim Partners LLC a 5-year warrant (the "Placement Agent Warrant") to purchase up to 1,260,000 shares of Common Stock (equal to 3% of the number of shares sold in the Offering), with an exercise price equal to $0.30 (120% of the offering price).

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After deducting closing costs and fees, the Company received net proceeds of approximately $9.7 million.

The Company's other material cash needs for the next 12 months will include payments of (i) costs of the clinical trials in the US and Israel; (ii) employee salaries; (iii) patents; (iv) construction fees for facilities to be used in the Company's research and development and (v) fees to Company consultants and legal advisors.

Company's operations are very capital intensive and will require substantial capital raisings. If the Company is not able to raise substantial additional capital, it may not be able to continue to function as a going concern and may have to cease operations. Even if the Company obtains funding sufficient to fund its operations in the short term, it would still be required to raise a substantial amount of capital in the future in order to reach profitability and to complete the commercialization of the Company's products. The Company's ability to fund these future capital requirements will depend on many factors, including the following:

· our ability to obtain funding from third parties, including any future collaborative partners; · the scope, rate of progress and cost of our clinical trials and other research and development programs; · the time and costs required to gain regulatory approvals; · the terms and timing of any collaborative, licensing and other arrangements that we may establish; · the costs of filing, prosecuting, defending and enforcing patents, patent applications, patent claims, trademarks and other intellectual property rights; · the effect of competition and market developments; and · future pre-clinical and clinical trial results. Critical Accounting Policies



Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue and expenses during the reporting periods. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical experience and other factors we believe are reasonable based on the circumstances, the results of which form our management's basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

During the quarter ended June 30, 2014 the Company first time adopted ASU 2014-10 "Development Stage Entities (Topic 915)". As a result, the Company no longer presents: (i) inception-to-date information in the statements of income, cash flows, and shareholder equity; (ii) label the financial statements as those of a development stage entity; (iii) disclose a description of the development stage activities in which the entity is engaged. Except of the above, there were no significant changes to our critical accounting policies during the quarter ended June 30, 2014. For information about critical accounting policies, see the discussion of critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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.

32 Subsequent Events Equity Plans



On July 9, 2014, the Board of Directors ("Board") of the Company voted to amend and restate the Company's non-employee director compensation plan (the "Second Amended and Restated Director Compensation Plan") to increase the annual award to non-U.S. directors to a nonqualified stock option to purchase 200,000 shares of Common Stock with an exercise price of $0.05 per share and to clarify the terms of committee member grants. Pursuant to the Second Amended and Restated Director Compensation Plan, every non-employee director of the Company, other than Chen Schor, is eligible to participate in the Second Amended and Restated Director Compensation Plan. Each eligible director is granted an annual award immediately following each annual meeting of stockholders beginning with the 2014 annual meeting. For non-U.S. directors, this annual award consists of a nonqualified stock option to purchase 200,000 shares of Common Stock. For U.S. directors, at their option, this annual award is either (i) a nonqualified stock option to purchase 100,000 shares of Common Stock or (ii) 100,000 shares of restricted stock. Additionally, each member of the Governance, Nominating and Compensation Committee (the "GNC Committee") or Audit Committee of the Board receives (i) a nonqualified stock option to purchase 30,000 shares of Common Stock or (ii) in the case of U.S. directors and at their option, 30,000 shares of restricted stock. The chair of the GNC Committee or Audit Committee will instead of the above committee award receive (i) a nonqualified stock option to purchase 50,000 shares of Common Stock or (ii) in the case of U.S. directors and at their option, 50,000 shares of restricted stock. Any eligible participant who is serving as chairperson of the Board shall also receive (i) a nonqualified stock option to purchase 100,000 shares of Common Stock or (ii) in the case of U.S. directors and at their option, 100,000 shares of restricted stock. Awards are granted on a pro rata basis for directors serving less than a year at the time of grant. The exercise price for options for U.S. directors will be equal to the closing price per share of the Common Stock on the grant date as reported on the Over-the-Counter Bulletin Board or the national securities exchange on which the Common Stock is then traded. The exercise price for options for non-U.S. directors is $0.05. Every option and restricted stock award will vest monthly as to 1/12 the number of shares subject to the award over a period of twelve months from the date of grant, provided that the recipient remains a member of the Board on each such vesting date, or, in the case of a committee award, remains a member of the committee on each such vesting date.


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Source: Edgar Glimpses


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