UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20192020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number 001-36641
BRAINSTORM CELL THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)
Delaware | 20-7273918 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
1325 Avenue of Americas, 28th Floor | |
New York, NY | 10019 |
(Address of principal executive offices) | (Zip Code) |
(201) 488-0460
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
Common Stock, $0.00005 par value | BCLI | NASDAQ Stock Market LLC
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx⌧ No¨◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx⌧ No¨
◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ||
Large accelerated filer | | Accelerated filer |
| ||
Non-accelerated filer | | Smaller reporting company |
| ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐ No x
☒
As of November 6, 2019,July 31, 2020, the number of shares outstanding of the registrant’s Common Stock, $0.00005 par value per share, was 22,606,492.31,527,937.
TABLE OF CONTENTS
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | |
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2
PART I – FINANCIAL INFORMATION
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBERAs of June 30, 20192020
U.S. DOLLARS IN THOUSANDS
(Except share data and exercise prices)
(UNAUDITED)
(UNAUDITED)
3
RAINSTORM
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBERAs of June 30, 20192020
U.S. DOLLARS IN THOUSANDS
(Except share data and exercise prices)
(UNAUDITED)
INDEX
INDEX
4
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
(Except share data)
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| U.S. $ in thousands | ||||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 2,095 | $ | 942 | ||||
| Short-term deposit (Note 4) | 34 | 6,122 | ||||||
| Account receivable | 1,924 | 2,009 | ||||||
| Prepaid expenses and other current assets (Note 5) | 619 | 1,197 | ||||||
| Total current assets | 4,672 | 10,270 | ||||||
| Long-Term Assets: | ||||||||
| Prepaid expenses and other long-term assets | 32 | 307 | ||||||
| Operating lease right of use asset | 2,443 | - | ||||||
| Property and Equipment, Net | 664 | 651 | ||||||
| Total long-term assets | 3,139 | 958 | ||||||
| Total assets | $ | 7,811 | $ | 11,228 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 9,144 | $ | 4,548 | ||||
| Accrued expenses | 1,975 | 1,042 | ||||||
| Other accounts payable | 839 | 622 | ||||||
| Total current liabilities | 11,958 | 6,212 | ||||||
| Long-Term Liabilities: | ||||||||
| Operating lease liability | 2,630 | - | ||||||
| Total long-term liabilities | 2,630 | - | ||||||
| Total liabilities | $ | 14,588 | $ | 6,212 | ||||
| Stockholders' Equity: | ||||||||
| Stock capital: (Note 8) | 11 | 11 | ||||||
| Common stock of $0.00005 par value - Authorized: 100,000,000 shares at each of September 30, 2019 and December 31, 2018; Issued and outstanding: 22,606,492 and 20,757,816 shares at September 30, 2019 and December 31, 2018, respectively. | ||||||||
| Additional paid-in-capital | 102,796 | 94,620 | ||||||
| Receipts on account of shares | - | 4,408 | ||||||
| Accumulated deficit | (109,584 | ) | (94,023 | ) | ||||
| Total stockholders' equity (deficit) | (6,777 | ) | 5,016 | |||||
| Total liabilities and stockholders' equity | $ | 7,811 | $ | 11,228 | ||||
| | | | | | |
| | June 30, | | December 31, | ||
| | 2020 | | 2019 | ||
| | U.S. $ in thousands | ||||
|
| Unaudited |
| Audited | ||
ASSETS |
| |
|
| |
|
Current Assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | 12,153 | | $ | 536 |
Short-term deposit (Note 4) | |
| 4,040 | |
| 33 |
Other accounts receivable | |
| 259 | |
| 2,359 |
Prepaid expenses and other current assets (Note 5) | |
| 176 | |
| 432 |
Total current assets | |
| 16,628 | |
| 3,360 |
| | | | | | |
Long-Term Assets: | |
| | |
| |
Prepaid expenses and other long-term assets | |
| 26 | |
| 32 |
Operating lease right of use asset ( Note 6) | |
| 1,649 | |
| 2,182 |
Property and Equipment, Net | |
| 918 | |
| 960 |
Total Long-Term Assets | |
| 2,593 | |
| 3,174 |
| | | | | | |
Total assets | | $ | 19,221 | | $ | 6,534 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
|
| |
|
|
Current Liabilities: | |
|
| |
|
|
Accounts payable | | $ | 4,604 | | $ | 14,677 |
Accrued expenses | |
| 2,022 | |
| 1,000 |
Operating lease liability (Note 6) | |
| 1,224 | |
| 1,263 |
Other accounts payable | |
| 990 | |
| 714 |
Total current liabilities | |
| 8,840 | |
| 17,654 |
| | | | | | |
Long-Term Liabilities: | |
| | |
| |
Operating lease liability (Note 6) | |
| 559 | |
| 1,103 |
Total long-term liabilities | |
| 559 | |
| 1,103 |
| | | | | | |
Total liabilities | | $ | 9,399 | | $ | 18,757 |
| | | | | | |
Stockholders’ Equity (deficit): | |
| | |
| |
Stock capital: (Note 7) | |
| 12 | |
| 11 |
Common Stock of $0.00005 par value - Authorized: 100,000,000 shares at June 30, 2020 and December 31, 2019 respectively; Issued and outstanding: 29,669,855 and 23,174,228 shares at June 30, 2020 and December 31, 2019 respectively. | |
| | |
| |
Additional paid-in-capital | |
| 142,594 | |
| 105,042 |
Receipts on account of shares | |
| — | |
| — |
Accumulated deficit | |
| (132,784) | |
| (117,276) |
Total stockholders’ equity (deficit) | |
| 9,822 | |
| (12,223) |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | 19,221 | | $ | 6,534 |
The accompanying notes are an integral part of the consolidated financial statements.
5
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
U.S. dollars in thousands
(Except share data)
| Nine months ended | Three months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development, net | $ | 11,018 | $ | 4,433 | $ | 4,008 | $ | 1,975 | ||||||||
| General and administrative | 4,318 | 4,193 | 1,543 | 1,257 | ||||||||||||
| Operating loss | (15,336 | ) | (8,626 | ) | (5,551 | ) | (3,232 | ) | ||||||||
| Financial expenses (income), net | 225 | (61 | ) | 83 | (56 | ) | ||||||||||
| Net loss | $ | (15,561 | ) | $ | (8,565 | ) | $ | (5,634 | ) | $ | (3,176 | ) | ||||
| Basic and diluted net loss per share from continuing operations | $ | (0.72 | ) | $ | (0.43 | ) | $ | (0.25 | ) | $ | (0.15 | ) | ||||
| Weighted average number of shares outstanding used in computing basic and diluted net loss per share | 21,630,007 | 19,754,159 | 22,254,993 | 20,691,900 | ||||||||||||
| | | | | | | | | | | | |
| | Six months ended |
| Three months ended | ||||||||
| | June 30, |
| June 30, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
| | Unaudited |
| Unaudited | ||||||||
| | | | | | | | | | | | |
Operating expenses: |
| |
|
| |
| | |
|
| |
|
| | | | | | | | | | | | |
Research and development, net | | $ | 11,642 | | $ | 7,010 | | $ | 5,694 | | $ | 3,554 |
General and administrative | |
| 4,066 | |
| 2,775 | |
| 1,706 | |
| 1,303 |
| | | | | | | | | | | | |
Operating loss | |
| (15,708) | |
| (9,785) | |
| (7,400) | |
| (4,857) |
| | | | | | | | | | | | |
Financial expenses (income), net | |
| (200) | |
| 142 | |
| (6) | |
| 43 |
| | | | | | | | | | | | |
Net loss | | $ | (15,508) | | $ | (9,927) | | $ | (7,394) | | $ | (4,900) |
| | | | | | | | | | | | |
Basic and diluted net loss per share from continuing operations | | $ | (0.56) | | $ | (0.47) | | $ | (0.25) | | $ | (0.23) |
| | | | | | | | | | | | |
Weighted average number of shares outstanding used in computing basic and diluted net loss per share | |
| 27,452,750 | |
| 21,312,335 | |
| 29,274,130 | |
| 21,703,001 |
The accompanying notes are an integral part of the consolidated financial statements.
6
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS'STOCKHOLDERS’ EQUITY
U.S. dollars in thousands
(Except share data)
| Common stock | Additional paid-in | Receipts on account of | Accumulated | Total stockholders' | ||||||||||||||||||||
| Number | Amount | capital | shares | deficit | equity (deficit) | |||||||||||||||||||
| Balance as of January 1, 2018 | 18,976,169 | $ | 11 | $ | 85,944 | $ | - | $ | (80,075 | ) | $ | 5,880 | ||||||||||||
| Stock-based compensation related to warrants and stock granted to service providers | 42,293 | (*) | 102 | - | - | 102 | ||||||||||||||||||
| Stock-based compensation related to stock and options granted to directors and employees | 147,820 | (*) | 917 | - | - | 917 | ||||||||||||||||||
| Exercise of options | 33,332 | (*) | 25 | - | - | 25 | ||||||||||||||||||
| Exercise and reissuance of warrants | 1,558,202 | (*) | 7,632 | 4,408 | - | 12,040 | ||||||||||||||||||
| Net loss | - | - | - | - | (13,948 | ) | (13,948 | ) | ||||||||||||||||
| Balance as of December 31, 2018 | 20,757,816 | $ | 11 | $ | 94,620 | $ | 4,408 | $ | (94,023 | ) | $ | 5,016 | ||||||||||||
| | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | Receipts on | | | | | Total | |||
| | Common stock | | paid-in | | account of | | Accumulated | | stockholders’ | |||||||
|
| Number |
| Amount |
| capital |
| shares |
| Deficit |
| equity (deficit) | |||||
Balance as of January 1, 2019 |
| 20,757,816 | | $ | 11 | | $ | 94,620 | | $ | 4,408 | | $ | (94,023) | | $ | 5,016 |
| | | | | | | | | | | | | | | | | |
Stock-based compensation related to warrants and stock granted to service providers |
| 5,908 | |
| (*) | |
| 25 | |
| — | |
| — | |
| 25 |
Stock-based compensation related to stock and options granted to directors and employees |
| 107,104 | |
| (*) | |
| 764 | |
| — | |
| — | |
| 764 |
Issuance of shares in at-the-market (ATM) offering (Note 7) |
| 542,736 | |
| (*) | |
| 2,064 | |
| — | |
| — | |
| 2,064 |
Exercise and reissuance of warrants |
| 1,741,999 | |
| (*) | |
| 7,534 | |
| (4,408) | |
| — | |
| 3,126 |
Exercise of options | | 18,665 | | | (*) | | | 35 | | | — | | | — | | | 35 |
Net loss |
| — | |
| — | |
| — | |
| — | |
| (23,253) | |
| (23,253) |
| | | | | | | | | | | | | | | | | |
Balance as of December 31, 2019 |
| 23,174,228 | | $ | 11 | | $ | 105,042 | | $ | — | | $ | (117,276) | | $ | (12,223) |
* Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
7
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS'STOCKHOLDERS’ EQUITY
U.S. dollars in thousands
(Except share data)
| Common stock | Additional paid-in | Receipts on account of | Accumulated | Total stockholders' | ||||||||||||||||||||
| Number | Amount | capital | shares | deficit | equity (deficit) | |||||||||||||||||||
| Balance as of January 1, 2019 | 20,757,816 | $ | 11 | $ | 94,620 | $ | 4,408 | $ | (94,023 | ) | $ | 5,016 | ||||||||||||
| Stock-based compensation related to warrants and stock granted to service providers | 5,908 | (*) | 25 | - | - | 25 | ||||||||||||||||||
| Stock-based compensation related to stock and options granted to directors and employees | 82,104 | (*) | 582 | - | - | 582 | ||||||||||||||||||
| Exercise and reissuance of warrants | 1,741,299 | (*) | 7,534 | (4,408 | ) | - | 3,126 | |||||||||||||||||
| Exercise of options | 18,665 | (*) | 35 | - | - | 35 | ||||||||||||||||||
| Net loss | - | - | - | - | (15,561 | ) | (15,561 | ) | ||||||||||||||||
| Balance as of September 30, 2019 | 20,606,492 | $ | 11 | $ | 102,796 | $ | - | $ | (109,584 | ) | $ | (6,777 | ) | |||||||||||
| | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | Total | ||
| | Common stock | | paid-in | | Accumulated | | stockholders’ | ||||||
|
| Number |
| Amount |
| capital |
| deficit |
| equity (deficit) | ||||
Balance as of January 1, 2020 |
| 23,174,228 | | $ | 11 | | $ | 105,042 | | $ | (117,276) | | $ | (12,223) |
| | | | | | | | | | | | | | |
Stock-based compensation related to stock and options granted to directors and employees |
| 134,447 | |
| (*) | |
| 1,181 | |
| — | |
| 1,181 |
Issuance of shares in at-the-market (ATM) offering (Note 7) | | 5,097,847 | | | 1 | | | 26,382 | | | — | | | 26,383 |
Issuance of shares and warrants in Registered Direct Offering (Note 7) |
| 1,250,000 | |
| (*) | |
| 9,957 | |
| — | |
| 9,957 |
Exercise of options | | 13,333 | | | (*) | | | 32 | | | — | | | 32 |
Net loss |
| — | |
| — | |
| — | |
| (15,508) | |
| (15,508) |
| | | | | | | | | | | | | | |
Balance as of June 30, 2020 |
| 29,669,855 | | $ | 12 | | $ | 142,594 | | $ | (132,784) | | $ | 9,822 |
* Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
8
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. dollars in thousands
| Nine months ended | Three months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | (15,561 | ) | $ | (8,565 | ) | $ | (5,634 | ) | $ | (3,176 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Depreciation | 114 | 89 | 37 | 33 | ||||||||||||
| Shares and options granted to service providers | 25 | - | - | - | ||||||||||||
| Stock-based compensation related to options granted to employees and directors | 582 | 598 | 217 | 235 | ||||||||||||
| Change in lease liability | 187 | - | 49 | - | ||||||||||||
| Decrease in accounts receivable and prepaid expenses | 938 | 965 | 290 | 670 | ||||||||||||
| Increase (decrease) in accounts payables | 4,596 | 1,178 | 379 | (1,580 | ) | |||||||||||
| Decrease in deferred grant income | - | (2,495 | ) | - | (1,755 | ) | ||||||||||
| Increase (decrease) in other accounts payable and accrued expenses | 1,150 | (435 | ) | 1,036 | (1,021 | ) | ||||||||||
| Total net cash used in operating activities | $ | (7,969 | ) | $ | (8,665 | ) | $ | (3,626 | ) | $ | (6,594 | ) | ||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of property and equipment | $ | (127 | ) | $ | (261 | ) | $ | (102 | ) | $ | (1 | ) | ||||
| Changes in short-term deposit | 6,088 | (4,921 | ) | 1,541 | 4,983 | |||||||||||
| Investment in lease deposit | - | (4 | ) | - | 1 | |||||||||||
| Total net cash provided by (used in) investing activities | $ | 5,961 | $ | (5,186 | ) | $ | 1,439 | $ | 4,983 | |||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from exercise of options | $ | 35 | $ | 25 | $ | 30 | $ | - | ||||||||
| Exercise and reissuance of warrants | 3,126 | 12,040 | 3,126 | 46 | ||||||||||||
| Total net cash provided by financing activities | $ | 3,161 | $ | 12,065 | $ | 3,156 | $ | 46 | ||||||||
| Increase (decrease) in cash and cash equivalents | $ | 1,153 | $ | (1,786 | ) | $ | 969 | $ | (1,565 | ) | ||||||
| Cash and cash equivalents at the beginning of the period | $ | 942 | $ | 2,483 | $ | 1,126 | $ | 2,262 | ||||||||
| Cash and cash equivalents at end of the period | $ | 2,095 | $ | 697 | $ | 2,095 | $ | 697 | ||||||||
| | | | | | | | | | | | |
| | Six months ended |
| Three months ended | ||||||||
| | June 30, |
| June 30, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
| | | | | | | | | | | | |
Cash flows from operating activities: |
| |
|
| |
| | |
|
| |
|
| | | | | | | | | | | | |
Net loss | | $ | (15,508) | | $ | (9,927) | | $ | (7,394) | | $ | (4,900) |
| | | | | | | | | | | | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | |
| | |
| | |
| |
Depreciation | |
| 99 | |
| 77 | |
| 50 | |
| 33 |
Shares and options granted to service providers | |
| — | |
| 25 | |
| — | |
| — |
Stock-based compensation related to options granted to employees and directors | |
| 1,181 | |
| 365 | |
| 791 | |
| 53 |
Finance lease expense (income) | | | (50) | | | 138 | | | 35 | | | 44 |
Decrease (increase) in other accounts receivable and prepaid expenses | | | 2,362 | | | 648 | | | 284 | | | (801) |
Increase (decrease) in trade payables | | | (10,073) | | | 4,217 | | | 33 | | | 3,736 |
Increase in deferred grant income | | | — | | | — | | | — | | | (511) |
Increase (decrease) in other accounts payable and accrued expenses | |
| 1,298 | |
| 114 | |
| 539 | |
| (1,162) |
| | | | | | | | | | | | |
Total net cash used in operating activities | | $ | (20,691) | | $ | (4,343) | | $ | (5,662) | | $ | (3,508) |
The accompanying notes are an integral part of the consolidated financial statements.
9
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. dollars in thousands
| | | | | | | | | | | | |
| | Six months ended |
| Three months ended | ||||||||
| | June 30, |
| June 30, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
| | | | | | | | | | | | |
Cash flows from investing activities: |
| |
|
| |
| | |
|
| |
|
| | | | | | | | | | | | |
Purchase of property and equipment |
| | (57) |
| | (25) | | | (50) |
| | (21) |
Changes in short-term deposit |
| | (4,007) |
| | 4,547 | | | (2,020) |
| | 1,412 |
Total net cash provided by (used in) investing activities | | $ | (4,064) | | $ | 4,522 | | $ | (2,070) | | $ | 1,391 |
| | | | | | | | | | | | |
Cash flows from financing activities: | |
| | |
| | |
| | |
| |
Proceeds from exercise of options | | | 32 | | | 5 | | | 3 | | | 5 |
Proceeds from issuance of shares in at-the-market (ATM) offering (Note 7) | | | 26,383 | | | — | | | 7,411 | | | — |
Proceeds from issuance of shares and warrants in Registered Direct Offering (Note 7) | | | 9,957 | | | — | | | — | | | — |
Total net cash provided by financing activities | | $ | 36,372 | | $ | 5 | | $ | 7,414 | | $ | 5 |
| | | | | | | | | | | | |
Increase (decrease) in cash and cash equivalents | | | 11,617 | | | 184 | | | (318) | | | (2,112) |
| | | | | | | | | | | | |
Cash and cash equivalents at the beginning of the period | | $ | 536 | | $ | 942 | | $ | 12,471 | | $ | 3,238 |
| | | | | | | | | | | | |
Cash and cash equivalents at end of the period | | $ | 12,153 | | $ | 1,126 | | $ | 12,153 | | $ | 1,126 |
The accompanying notes are an integral part of the consolidated financial statements.
10
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 1 - GENERAL
| The Company was incorporated in the State of Delaware on November 15, 2006, and previously was incorporated in the State of Washington. In October 2004, the Company formed its wholly-owned subsidiary, Brainstorm Cell Therapeutics Ltd. (“BCT”) in Israel, which currently conducts all of the research and development activities of the Company. |
The Common Stock is publicly traded on the NASDAQ Capital Market under the symbol “BCLI”.
| B. | The Company, through BCT, holds rights to commercialize certain stem cell technology developed by Ramot of Tel Aviv University Ltd. ("Ramot"), (see Note 3). Using this technology, the Company has been developing novel adult stem cell therapies for debilitating neurodegenerative disorders such as |
| C. |
| D. | The Company has made significant progress in |
| E. | The Phase 3 ALS trial pre-specified interim safety analysis by an independent Data Safety Monitoring Board (DSMB) was successfully completed in August 2018. The DSMB completed its second pre-specified interim analysis of safety outcomes for 106 participants treated with NurOwn® in the Phase 3 ALS trial on October 28, 2019. |
| G. | On June 24, 2020, the Company announced a new clinical program focused on the development of NurOwn® as a treatment for Alzheimer's disease. As part of the newly announced program, the Company is planning a multi- |
11
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
| national Phase 2 clinical trial in Europe to evaluate the safety and efficacy of NurOwn® treatment in patients with prodromal to mild Alzheimer's disease. |
| H. | The Company received Good Manufacturing Practice (GMP) approval from the Israel Ministry of Health (MoH) for our Israeli contract manufacturing facility at the Hadassah Medical Center in Jerusalem. The GMP certificate confirms the Company's manufacturing site compliance with Israeli GMPs which are recognized as equivalent to EU standards. |
GOING CONCERN:
Since its inception, the Company has devoted substantially all of its efforts to research and development, clinical trials, recruiting management and technical staff, acquiring assets and raising capital. The Company is still in its development and clinical stage and has not yet generated revenues. The extent of the Company's future operating losses and the timing of becoming profitable are uncertain. The Company has funded its operations to date primarily through public and private sales of its Common Stock and warrants, the exercise of warrants, the issuance of convertible promissory notes, sales via ATM program, and through grants from California Institute for Regenerative Medicine (CIRM) and the Israel Innovation Authority of the Ministry of Economy and Industry (the "IIA") (formerly the Office of the Chief Scientist of the Ministry of Economy and Industry (the "OCS)).
Additional funding will be required to begin the commercialization efforts and to achieve a level of sales adequate to support the Company's cost structure. The COVID-19 pandemic may continue to adversely disrupt the Company's operations, including the ability to complete the ongoing clinical trials and may have other adverse effects on Company's business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on Company's business, operations and ability to raise capital.
To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, additional public and private sales of its Common Stock and warrants, the exercise of warrants, the issuance of convertible promissory notes, sales of common stock via its ATM program and other funding transactions. While the Company has been successful in raising financing recently and in the past, there can be no assurance that it will be able to do so in the future on a timely basis on terms acceptable to the Company, or at all. Uncertain market conditions and approval by regulatory bodies and adverse results from clinical trials may (among other reasons) adversely impact the Company's ability to raise capital in the future.
Management expects that the Company will continue to generate losses from the clinical development and regulatory activities, which will result in a negative cash flow from operating activity. The Company currently has sufficient cash to complete its ongoing ALS, Progressive MS and Alzheimer’s Disease clinical trials. Over the longer term, if the Company is granted a BLA approval, additional capital raise will be needed in connection with strategic partnerships and to commercialize Nurown® for ALS, and to conduct additional trials for other indications. If the Company is not able to raise additional capital for these purposes, management may need to slow the pace of commercialization or the Company may not be able to continue to function as a going concern. The Company's consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.
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BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 1 - GENERAL (Cont.)
To date the Company has not generated revenues from its operational activities and has incurred substantial operating losses. Management expects the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial resources and through additional raises of capital.
Such conditions raise substantial doubts about the Company's ability to continue as a going concern. Management’s plan includes raising funds from outside potential investors. However, there is no assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Unaudited Interim Financial Statements
The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
2019.
Operating results for the three months ended SeptemberJune 30, 2019,2020, are not necessarily indicative of the results that may be expected for the year endingended December 31, 2019.2020.
B. Significant Accounting Policies
The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.
C. Recent Accounting Standards
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes toThe Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the Interim Condensed Consolidated Financial Statements
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In June 2016,end of the FASB issued a new standard requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. This standard is effective forCompany's previous fiscal year may be applicable, the Company inhas not identified any standards that the first quarter of 2020; early adoption is permitted beginning in the first quarter of 2019. It is required to be applied on a modified-retrospective approach with certain elements being adopted prospectively.Company believes merit further discussion. The Company does not expectbelieves that none of the adoption of this standardnew standards will have a significant impact on the financial position or resultsstatements.
D. Use of operations.
In June 2018, the FASB issued ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The ASU 2018-07 does not have a material impact on the Company's consolidated financial statements.
On January 1, 2019 the Company adopted ASU 2016-02, "Leases" (Topic 842) (“ASU 2016-02”) using the modified retrospective approach for all lease arrangements at the beginning period of adoption. Results for the reporting period beginning January 1, 2019 are presented under ASU 2016-02, which requires, among other items, lessees to recognize a right-of-use asset (“ROU assets”) and lease liability for most leases. Upon adoption of the new lease standard, the Company recorded right of use assets of $3,197 and lease liabilities of $3,197 in connection with its operating leases. See Note 6 for additional information regarding our commitments under various lease obligations.
Arrangements that are determined to be leases at inception are recognized in long-term ROU assets and long-term lease liabilities in the condensed consolidated balance sheet at lease commencement. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future fixed lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company applies its incremental borrowing rate based on the economic environment at commencement date in determining the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases or payments are recognized on a straight-line basis over the lease term.
estimates
The preparation of financial statements in conformity with GAAP 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.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 3 - RESEARCH AND LICENSE AGREEMENT
The Company entered into a Research and License Agreement, as amended and restated, with Ramot (the “License Agreement”). Pursuant to the remuneration terms of the License Agreement, the Company has agreed to pay Ramot royalties on Net Sales of the Licensed Product as follows:
| a) |
| b) |
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BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
Capitalized terms set forth above which are not defined shall have the meanings attributed to them under the License Agreement.
NOTE 4 - SHORT TERM INVESTMENTS
DEPOSITS
Short term investmentsdeposits on SeptemberJune 30, 20192020 and December 31, 20182019 include bank deposits bearing annual interest rates varying from 0.05% 0.15%to 3.15%2.00%, with maturities of up to 46 months as of SeptemberJune 30, 20192020 and December 31, 2018.2019.
NOTE 5 - PREPAID EXPENSES
In November 2017 the Company has contracted with City of Hope'sHope’s Center for Biomedicine and Genetics ("COH") to produce clinical supplies of NurOwn® adult stem cells for the Company’s ongoing Phase 3 clinical study. In 2017 the Company made anhas paid COH $2,665 advance payment to COH of $2,665.payment. The advance payment was recorded as prepaid expense and is amortized over the term of the agreement. As of December 31, 2018, $1,103 and2019, $276 were recorded as current and long-term prepaid expense, respectively.expense. As of SeptemberJune 30, 2019, $5512020, the prepaid expenses were recorded as current prepaid expense.fully reduced.
NOTE 6 - LEASES
On January 1, 2019 the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the modified retrospective approach for all lease arrangements at the beginning of the period of adoption. Leases existing for the reporting period beginning January 1, 2019 are presented under ASU 2016-02. The Company leases facilities, clinical research rooms, and vehicles under operating leases. At SeptemberJune 30, 2019,2020, the Company’s ROU assets and lease liabilities for operating leases totaled $2,443$1,649 and $2,630,$1,783, respectively. The impact of adopting the new lease standard was not material to the Company’s condensed consolidated statement of operations for the periods presented.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 6 - LEASES (Cont.)
Supplemental cash flow information related to operating leases was as follows (unaudited):
| | | |
|
| Six Months Ended | |
| | June 30, | |
| | 2020 | |
Cash payments for operating leases | | $ | 653 |
New operating lease assets obtained in exchange for operating lease liabilities | | $ | 1,649 |
| Nine Months Ended September 30, 2019 | ||||
| Cash payments for operating leases | $ | 965 | ||
| New operating lease assets obtained in exchange for operating lease liabilities | $ | 2,443 | ||
As of SeptemberJune 30, 2019, the Company’s2020, our operating leases had a weighted average remaining lease term of 2.461.48 years and a weighted average discount rate of 8.25%. Future lease payments under operating leases as of SeptemberJune 30, 20192020 were as follows (unaudited):
| | | |
|
| Operating Leases | |
Remainder of 2020 | | $ | 653 |
2021 | |
| 1,243 |
Total future lease payments | |
| 1,896 |
Less imputed interest | |
| (113) |
Total lease liability balance | | $ | 1,783 |
| Operating Leases | ||||
| Remainder of 2019 | $ | 331 | ||
| 2020 | 1,308 | |||
| 2021 | 1,237 | |||
| Total future lease payments | 2,876 | |||
| Less imputed interest | (246 | ) | ||
| Total lease liability balance | $ | 2,630 | ||
NOTE 7 - DEFERRED GRANT INCOME
In July 2017 the Company received an award in the amount of $15,912 from CIRM to aid in funding the Company’s Phase 3 study of NurOwn®, for the treatment of ALS. An aggregate amount of $12,550 and $9,050 related to the project was received through September 30, 2019 and December 31, 2018, respectively. The award does not bear a royalty payment commitment nor is the award otherwise refundable. $3,290 and $6,267 was recorded as participation by CIRM in research and development expenses during the nine months ended in September 30, 2019 and during the year ended December 31, 2018, respectively.
NOTE 8 - STOCK CAPITAL
The rights of Common Stock are as follows:
Holders of Common Stock have the right to receive notice to participate and vote in stockholdergeneral 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 is publicly traded on the NASDAQ Capital Market under the symbol BCLI.
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BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 8 - STOCK CAPITAL (Cont.)
Private placements and public offerings:
2018 Warrant Exercise Agreement:
On June 6, 2018, the Company entered into a Warrant Exercise Agreement: (the “2018 Warrant Exercise Agreement”) with certain holders (the “2018 Warrant Holders”) of warrants (the “2015 Warrants”) to purchase Company Common Stock, which 2015 Warrants were originally issued in the Company’s January 8, 2015 private placement. Pursuant to the 2018 Warrant Exercise Agreement, the 2018 Warrant Holders exercised their 2015 Warrants for a total of 2,458,201 shares of Common Stock at an amended exercise price of $5 per share. The warrant exercises generated gross cash proceeds to the Company of $12.3 million. In addition, the Company issued new warrants to the 2018 Warrant Holders to purchase an aggregate 2,458,201 unregistered shares of Common Stock, at an exercise price of $9, with an expiration date of December 31, 2020 (the “2018 Warrants”).
The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The shares issuable upon exercise of the Amended 2018 Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The exercised shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-201704). The issuance of the exercised shares and 2018 Warrants was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor” within the meaning of Rule 501 of Regulation D.
2019 Warrant Exercise Agreement:
On August 2, 2019, the Company entered into a Warrant Exercise Agreement which generated gross cash proceeds to the Company of approximately $3.3 million. Pursuant to the agreement, certain holders (the “Holders”“2019 Warrant Holders”) of warrants issued by the Company on June 6, 2018 (the “2018 Warrants”) agreed to exercise 842,000 shares of Common Stock of their 2018 Warrants, at an amended exercise price of $3.90 per share, and the Company agreed to issue new warrant shares to the Holders to purchase 842,000 shares of Common Stock (the “New“2019 Warrants”), at an exercise price of $7.00, with an expiration date of December 31, 2021. The 2018 Warrants held by the 2019 Warrant Holders, to the extent not exercised, were also amended to reduce the exercise price to $7.00 per share and to extend the expiration date to December 31, 2021.2021 (the “Amended 2018 Warrants”).
Subject to limited exceptions, for the 90 days following the date of the Warrant Exercise Agreement, neither the Company nor any Subsidiary will issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock, without the prior written consent of the Holders of a majority of the New Warrant shares. The Company also agreed that during the time the New Warrants are unexercised, the Company will not enter into any agreements with any holder ofAmended 2018 Warrants with more favorable terms, without the consent of the Holders of a majority of the warrant shares then exercisable under all outstanding Augustand 2019 Warrant Exercise Agreements.
The New Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The shares issuable upon exercise of the New2019 Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349), and the shares issuable upon exercise of the Amended 2018 Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The Exercised Sharesexercised shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The issuance of the Exercised Sharesexercised shares, Amended 2018 Warrants and New2019 Warrants is exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor” within the meaning of Rule 501 of Regulation D.
15
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
At-the-market (ATM) Offering: Offerings:
On June 11, 2019, the Company entered into a Distribution Agreement with Raymond James & Associates, Inc. (“Agent”("Raymond James"), pursuant to which the Company sold, through the Raymond James, shares of Common Stock having an aggregate offering amount of $20,000,000 (the "June 11, 2019 ATM") in an "at the market" offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, by sales made directly on the Nasdaq Capital Market.
On March 6, 2020, the Company entered into a new Distribution Agreement with Raymond James, pursuant to which the Company may sell from time to time, through the Agent, shares of Common Stock, (the “Shares”), having an aggregate offering price of up to $20,000$50,000,000 (the “ATM Offering”“March 6, 2020 ATM”). Sales ofunder the Shares, if any, will beMarch 6, 2020 ATM are made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and Raymond James. During the Distribution Agent.
quarter ended June 30, 2020, the Company sold an aggregate of 1,162,527 shares of Common Stock pursuant to the March 6, 2020 ATM at an average price of $6.57 per share, raising gross proceeds of approximately $7.64 million. Since its inception on March 6, 2020 through the quarter ended June 30, 2020, the Company sold an aggregate of 1,499,014 shares of Common Stock at an average price of $6.27 per share, raising gross proceeds of approximately $9.40 million.
The Company has no obligation under the March 6, 2020 ATM to sell any of the Shares,shares, and may at any time suspend sales under the Distribution Agreement or terminate the Distribution AgreementMarch 6, 2020 ATM in accordance with its terms. Agent will beRaymond James is entitled under each ATM to a fixed commission of 3.0% of the aggregate gross proceeds from the any shares sold. Shares sold. The Shares will besold under the ATMs are issued pursuant to the Company’s existing shelf registration statement on Form S-3 (File No. 333-225517) (the “Registration Statement”), which was filed with the SEC and declared effective by the SEC on June 29, 2018,Shelf Registration Statement, and the Prospectus Supplement to the Registration StatementStatements filed June 11, 2019.2019 and March 6, 2020 respectively.
Registered Direct Offering:
AsOn March 6, 2020, the Company entered into and closed a $10.0 million registered direct offering of September 30, 2019, no Shares were issued or sold under the Distribution Agreement .
1,250,000 shares of Common Stock at a per share purchase price equal to $8.00. The purchaser also received a three-year warrant to purchase up to 250,000 shares of Common Stock at any exercise price of $15.00 per share.
Since its inception and as of June 30, 2020 the Company has raised approximately $62,000, net$101 million, gross in cash in consideration for issuances of Common Stock and warrants in private placements and public offerings as well as proceeds from warrants exercises.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 8 - STOCK CAPITAL (Cont.)
Stock Plans:
As of SeptemberJune 30, 2019,2020, the Company had outstanding awards for stock options under four stockholder approved plans: (i) the 2004 Global Stock Option Plan and the Israeli Appendix thereto (the “2004 Global Plan”) (ii) the 2005 U.S. Stock Option and Incentive Plan (the “2005 U.S. Plan,” and together with the 2004 Global Plan, the “Prior Plans”); (iii) the 2014 Global Share Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) (the “2014 Global Plan”); and (iv) the 2014 Stock Incentive Plan (the “2014 U.S. Plan” and together with the 2014 Global Plan, the “2014 Plans”).
The 2004 Global Plan and 2005 U.S. Plan expired on November 25, 2014 and March 28, 2015, respectively. Grants that were made under the Prior Plans remain outstanding pursuant to their terms. The 2014 Plans were approved by the stockholders on August 14, 2014 (at which time the Company ceased to issue awards under each of the 2005 U.S. Plan and 2004 Global Plan) and amended on June 21, 2016.2016 and November 29, 2018. Unless otherwise stated, option grants prior to August 14, 2014 were made pursuant to the Company’s Prior Plans, and grants issued on or after August 14, 2014 were made pursuant to the Company’s 2014 Plans, and expire on the tenth anniversary of the grant date. The 2014 Plans have a shared pool of 4,000,000 shares of Common Stock available for issuance.
16
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
As of SeptemberJune 30, 2019, 2,011,4232020, 1,393,410 shares were available for future issuances under the 2014 Plans. The exercise price of the options granted under the 2014 Plans may not be less than the nominal value of the shares into which such options are exercised. Any options under the 2014 Plans that are canceled or forfeited before expiration become available for future grants. The Governance, Nominating and Compensation Committee (the “GNC Committee”) of the Board of Directors of the Company administers the Company’s stock incentive compensation and equity-based plans.
Share-based compensation to employees and to directors:
Employees:
Chaim Lebovits, the Company’s Chief Executive Officer and President (i) was granted a stock option underUnder the 2014 Global Plan on September 28, 2015Plans, the Company may award stock options to certain employees, officers, directors, and/or service providers. The stock options vest in accordance with such conditions and restrictions determined by the GNC Committee. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a specified period. Stock options awarded are valued based upon the Black-Scholes option pricing model and the Company recognizes this value as stock compensation expense over the periods in which the options vest. Use of the Black Scholes option-pricing model requires that the Company make certain assumptions, including expected volatility, risk-free interest rate, expected dividend yield, and the expected life of the options. The Company granted stock options to purchase 618,666 shares during the six months ended June 30, 2020.There were 0 options granted during the six months ended June 30, 2019.
Stock options fair value assumptions for the purchase of up to 369,619 sharesstock options granted during the six months ended June 30, 2020 are as follows:
| | | |
| | For the six | |
| | months ended | |
| | June 30, | |
| 2020 | | |
Option life (years) | | 10 | |
Risk free interest rate | | 0.36%-1.73% | |
Dividend yield | | 0 | |
Expected volatility | | 58%-63% | |
Expected life (years) | | 5.04-5.50 | years |
A summary of the Company’s CommonCompany's option activity related to options to employees and directors, and related information as of June 30, 2020 is as follows:
| | | | | | |
| | For the Six months ended | ||||
| | June 30, 2020 | ||||
|
| |
| Weighted |
|
|
| | | | average | | Aggregate |
| | Amount of | | exercise | | intrinsic |
| | options * | | price | | value |
| | | | $ | | $ |
Outstanding at December 31, 2019 |
| 1,293,007 | | 3.0142 |
| |
Granted |
| 618,666 | | 6.4419 |
| |
Exercised |
| (13,333) | | 3.0000 |
| |
Cancelled |
| (4,000) | | 3.7500 |
| |
Outstanding at June 30, 2020 |
| 1,894,340 | | 4.1322 |
| 13,407,710 |
Exercisable at June 30, 2020 |
| 833,340 | | 1.7276 |
| 7,902,051 |
* Represents Employee Stock at a per share exercise price of $2.45, which grant is fully vested and exercisable and shall be exercisable for a period of two years after termination of employment; (ii) received on July 26, 2017, July 26, 2018, July 26, 2019, and is entitled to receive on each anniversary thereafter (provided he remains Chief Executive Officer), a grant of 31,185 shares of restricted stock, each of which vests as to twenty-five percent (25%) of the award on the first, second, third and fourth anniversary of the date of grant and is subject to accelerated vesting upon a Change of Control (as defined in the Lebovits employment agreement) of the Company; and (iii) was granted on July 26, 2017 a fully vested and exercisable option to purchase up to 41,580 shares of Common Stock, which remained exercisable until the 2nd anniversary of the date of grant, regardless of whether Mr. Lebovits remains employed by the Company, with an exercise price per share of $4.81. The option was fully-vested until the 2nd anniversary of the date of grant, when it expired unexercised.
Dr. Ralph Kern, Chief Operating Officer and Chief Medical Officer of the Company, received on March 6, 2017, March 6, 2018 and March 6, 2019, and is entitled to receive on each anniversary thereafter (provided he remains employed by the Company), a grant of 35,885 shares of restricted stock, each of which vests as to twenty-five percent (25%) of the award on the first, second, third and fourth anniversary of the date of grant and is subject to accelerated vesting upon a Change of Control (as defined in the agreement) of the Company.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 8 - STOCK CAPITAL (Cont.)
Options only (not including RSUs).
Share-based compensation to employees and to directors: (Cont.):
Employees: (Cont.)
On March 6, 2017, Dr. Kern also received an option under the 2014 U.S. Plan to purchase up to 47,847 shares of Common Stock with an exercise price per share of $4.18. The option was fully vested and exercisable until the 2nd anniversary of the date of grant, when it expired unexercised.
Uri Yablonka, the Company’s Executive Vice President, Chief Business Officer and director is granted a stock option for the purchase of up to 13,333 shares of Common Stock on the first business day after each annual meeting of stockholders (or special meeting in lieu thereof) of the Company (including on November 10, 2017 and November 30, 2018), each with an exercise price per share of $0.75, and each of which vests and becomes exercisable in 12 monthly installments. The Company also granted Mr. Yablonka 5,543 shares of restricted Common Stock on July 13, 2017.
On November 20, 2017, the Company granted to Eyal Rubin, the Company’s Chief Financial Officer, 25,000 shares of restricted Common Stock, which fully vested on April 1, 2018. On November 20, 2017 the Company also granted to Mr. Rubin an option to purchase up to 93,686 shares of Common Stock, at an exercise price per share equal to $4.30 per share, which shall vest and become exercisable as to 25% of the shares underlying the Option on each of the first, second, third and fourth anniversary of the date of grant, subject to accelerated vesting upon a Change of Control of the Company or a Material Secondary Public Offering of the Company (each as defined in Mr. Rubin’s employment agreement).
On August 28, 2018, the Company granted Arturo Araya, Chief Commercial Officer of the Company an option to purchase 200,000 shares of Common Stock, at an exercise price of $3.98 per share. 25% of the grant shall vest and become exercisable on each of the first, second, third and fourth anniversaries of the grant date and subject to accelerated vesting upon a Change of Control (as defined in the agreement). On August 28, 2018, Mr. Araya resigned from the GNC Committee, and the restricted stock previously granted to him in connection with his service on the Board and the GNC Committee ceased vesting.
On September 6, 2019, the Company granted Preetam Shah, EVP, Chief Financial Officer and Treasurer of the Company, stock options (i) to purchase up to 100,000 shares of Common Stock, at an exercise price of $3.96 per share, and (ii) to purchase up to 100,000 shares of Common Stock at an exercise price per share equal to $6.00 per share. Each option shall vest and become exercisable as follows: 25% of the shares underlying the option shall vest and become exercisable on the first anniversary of the date of grant, and the remaining shares underlying the option shall vest and become exercisable in equal quarterly installments thereafter, until fully vested and exercisable on the fourth anniversary of the date of grant, and is subject to accelerated vesting upon a Change of Control (as defined in Dr. Shah’s employment agreement) of the Company.
On September 6, 2019, the Company granted Dr. Shah 25,000 shares of restricted common stock of the Company, which shall vest as to 100% of the award on the one year anniversary of the grant date, and is subject to accelerated vesting upon a Change of Control (as defined in Dr. Shah’s employment agreement) of the Company.
17
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company's shares on June 30, 2020, multiplied by the number of in-the-money options on those dates) that would have been received by the option holders had all option holders exercised their options on those dates.
NOTE 8 - STOCK CAPITAL (Cont.)
Share-based compensation toCompensation expense recorded by the Company in respect of its stock-based employees and to directors: (Cont.)
Directors:
From 2005 through 2015,directors compensation awards in accordance with ASC 718-10 for the Company granted its directors options to purchase an aggregate of 402,778 shares of Common Stock at an average exercise price of $1.34 per share.
The Company’s Second Amended and Restated Director Compensation Plan was approved in July 9, 2014 and amended on April 29, 2015, February 26, 2017 and July 13, 2017 (as amended, the “Director Compensation Plan”). The Director Compensation Plan governs Company compensation of eligible non-employee directors of the Company, except that certain non-employee directors receive individualized compensation and are not entitled receive annual director awards under the Director Compensation Plan, but are entitled to committee compensation under the Director Compensation Plan in the event that they qualify for and serve as a member of any committee of the Board. The Director Compensation Plan also determines the annual awards to be granted to qualified directors for their services in future periods, which annual awards have had the same terms since 2014, as further detailed in the Director Compensation Plan.
During the 9six months ended SeptemberJune 30, 2020 and 2019 the following equity grants were made under the 2014 Plansamounted to eligible directors:$1,181 and $365, respectively.
Restricted Stock:
The Company awards stock and restricted stock to certain employees, officers, directors, and/or service providers. The restricted stock vests in accordance with such conditions and restrictions determined by the GNC Committee. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a specified restricted period. The purchase price (if any) of shares of restricted stock is determined by the GNC Committee. If the performance goals and other restrictions are not attained, the grantee will automatically forfeit their unvested awards of restricted stock to the Company. Compensation expense for restricted stock is based on fair market value at the grant date.
| Number of Shares of Restricted Stock | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (Years) | ||||||||||||||||
| Nonvested as of December 31, 2018 | 152,908 | 3.96 | 1.56 | |||||||||||||||
| | | | | | | ||||||||||||
|
| |
| |
| Weighted Average | ||||||||||||
| | | | | | Remaining | ||||||||||||
| | Number of Shares | | Weighted Average | | Contractual | ||||||||||||
| | of Restricted | | Grant Date Fair | | Term | ||||||||||||
| | Stock | | Value | | (Years) | ||||||||||||
Nonvested as of December 31, 2019 |
| 201,385 |
| 4.00 |
| 1.95 | ||||||||||||
| Granted | 88,012 | 3.96 |
| 134,613 |
| 6.24 |
| | ||||||||||
| Vested | 60,979 | 3.32 |
| 37,297 |
| 3.81 |
| | ||||||||||
| Forfeitures | - | - |
| — |
| — |
| | ||||||||||
| Nonvested as of September 30, 2019 | 179,941 | 3.98 | 1.99 | |||||||||||||||
Nonvested as of June 30, 2020 |
| 298,701 |
| 5.03 |
| 1.45 | ||||||||||||
Compensation expense recorded by the Company in respect of its stock and restricted stock awards to certain employees, officers, directors, and/or service providers for the ninethree months ended SeptemberJune 30, 20192020 amounted to $94.
BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 8 - STOCK CAPITAL (Cont.)
Share-based compensation to employees and to directors: (Cont.)
Restricted Stock: (Cont.)
A summary of the Company's option activity related to options to employees and directors, and related information is as follows:
| For the Nine months ended September 30, 2019 | ||||||||||||
| Amount of options * | Weighted average exercise price | Aggregate intrinsic value | ||||||||||
| $ | $ | |||||||||||
| Outstanding at beginning of period | 1,496,287 | 3.0581 | ||||||||||
| Granted | 204,167 | 4.8937 | ||||||||||
| Exercised | (18,665 | ) | 1.8943 | |||||||||
| Cancelled | (253,514 | ) | 4.0996 | |||||||||
| Outstanding at end of period | 1,428,275 | 3.1509 | 1,069,975 | |||||||||
| Vested and expected-to-vest at end of period | 881,564 | 2.0076 | 1,668,280 | |||||||||
* Represents Employee Stock Options only (not including RSUs).
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s shares on September 30, 2019, multiplied by the number of in-the-money options on those dates) that would have been received by the option holders had all option holders exercised their options on those dates.
Compensation expense recorded by the Company in respect of its stock-based employees and directors compensation awards in accordance with ASC 718-10 for the nine months ended September 30, 2019 and 2018 amounted to $582 and $598, respectively.
Shares and options to service providers:
On March 26, 2019, the Company issued to its legal advisor 5,908 shares of Common Stock under the 2014 U.S. Plan for certain 2018 legal services. The related compensation expense was recorded as general and administrative expense in 2018.
On May 23, 2019, the Company granted to a former director, in consideration for services rendered to the Company, an option under the 2014 Global Plan to purchase up to 4,167 shares of Common Stock with an exercise price per share of $0.75. The option was fully vested and exercisable as of the date of grant.
$228.
Total Stock-Based Compensation Expense:
Expense
The total stock-based compensation expense, related to shares, options and warrants granted to employees, directors and service providers was comprised, at each period, as follows:
| | | | |
| | Six months ended | ||
| | June 30, | ||
|
| 2020 |
| 2019 |
| | | | |
Research and development | | 491 | | 60 |
General and administrative |
| 690 |
| 330 |
Total stock-based compensation expense |
| 1,181 |
| 390 |
| Nine months ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| Research and development | 91 | 73 | ||||||
| General and administrative | 516 | 525 | ||||||
| Total stock-based compensation expense | 607 | 598 | ||||||
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BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to the Interim Condensed Consolidated Financial Statements
NOTE 8 – SUBSEQUENT EVENTS
In December 2019, a novel strain of coronavirus, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States, Europe and Israel, where the Company conducts its operations, as well as its clinical trials for NurOwn®. In response to the spread of COVID-19 and to ensure safety of employees and continuity of business operations, we closed our offices, with our administrative employees continuing their work remotely and limited the number of staff in any given research and development laboratory. Our research and development laboratory in Israel and manufacturing sites in U.S. remain open.
As of the date of this report, our U.S. Phase 2 PMS clinical trial has continued with slight delays in the pace of enrollment due to site access restrictions related to the global COVID-19 pandemic. Scheduled March and April 2020 new patient enrollments were deferred to May 2020 due to site closures related to COVID-19. As of June 2020, all the trial sites were back on track to continue with the trial. As of August 4, 2020, all 20 study participants have been enrolled in the study. The Company is currently collecting the clinical and biomarker data from treated patients. Dosing of all participants is expected to be completed in the fourth quarter of 2020.
The Phase 3 ALS clinical trial continued to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19. As of July 2, 2020, the study completed dosing of all the participants in the Phase 3 ALS trial. The Phase 3 ALS trial is expected to generate top-line data by the end of November this year.
Because of the COVID-19 outbreak, the Company may, in the future, experience disruptions that could severely impact its business, including clinical trial activities; participant enrollment; or any currently unforeseen delays in completion of study timelines. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. The Company's management team is actively monitoring this situation and the possible effects on the financial condition, liquidity, operations, suppliers, industry, and workforce.
On July 1, 2020, the Company received a non-dilutive bonus payment of $700,000 from California Institute for Regenerative Medicine (CIRM) for treating more California participants than originally proposed in its Phase 3 ALS trial.
From July 1, 2020 through July 31, 2020, the Company sold an aggregate of 945,082 shares of Common Stock pursuant to the March 6, 2020 ATM, at an average price of $14.48 per share, raising additional gross proceeds of approximately $13.69 million.
Between July 20, 2020 and July 24, 2020, 2018 Warrant Holders exercised an aggregate of 280,000 shares of the Amended 2018 Warrants (the “2018 Exercised Shares”), which generated gross cash proceeds to the Company of $1.96 million.
Between July 15, 2020 and July 24, 2020, 2019 Warrant Holders exercised an aggregate of 620,000 shares of the 2019 Warrants (the "2019 Exercised Shares"), which generated gross cash proceeds to the Company of $4.34 million.
In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events through the date the condensed consolidated financial statements were issued. The Company concluded that no other subsequent events have occurred that would require recognition or disclosure in the condensed consolidated financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains numerous statements, descriptions, forecasts and projections, regarding BrainstormBrainStorm Cell Therapeutics Inc. (together with its consolidated subsidiaries, the “Company,” “Brainstorm,“BrainStorm,” “we,” “us” or “our”) and its potential future business operations and performance, including financial results for the most recent fiscal quarter, statements regarding the market potential for treatment of neurodegenerative disorders such as ALS, the sufficiency of our existing capital resources for continuing operations in 20192020 and beyond, the safety and clinical effectiveness of our NurOwn® technology, our clinical trials of NurOwn® and its related clinical development, and our ability to develop collaborations and partnerships to support our business plan. 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,” “projects,” “targets,” “goals,” “estimates,” “predicts,” “likely,” “potential,” or “continue” or the negative of any of these terms or similar words. 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.” These risks and uncertainties include, but are not limited to our need to raise additional capital, our ability to continue as a going concern, regulatory approval of our NurOwn® treatment candidate, the success of our product development programs and research, regulatory and personnel issues, development of a global market for our services, the ability to secure and maintain research institutions to conduct our clinical trials, the ability to generate significant revenue, the ability of our NurOwn® treatment candidate to achieve broad acceptance as a treatment option for ALS or other neurodegenerative diseases, our ability to manufacture and commercialize our NurOwn® treatment candidate, obtaining patents that provide meaningful protection, competition and market developments, our ability to protect our intellectual property from infringement by third parties, heath reform legislation, demand for our services, currency exchange rates and product liability claims and litigation,disruptions in our business due to the COVID-19outbreak, including our clinical development activities, and other factors described under “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2018.2019, as updated by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. 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, except as required by applicable securities laws and regulations. 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 this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2018,2019,as updated by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, in addition to the other information set forth herein and elsewhere in our other public filings with the Securities and Exchange Commission (“SEC”).
Company Overview
| NurOwn® leverages innovative and proprietary cell culture methods to induce autologous bone marrow-derived mesenchymal stem cells (MSCs) to secrete high levels of neurotrophic factors (NTFs), modulate neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and improve neurological function. |
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| NurOwn® is currently being evaluated in Phase 3 ALS, Phase 2 PMS and Phase 2 |
| Our |
| The Israeli Subsidiary was granted approval by the Israeli Ministry of Health (“MoH”) to treat ALS |
| NurOwn® has a strong and comprehensive intellectual property portfolio. |
| NurOwn® was granted Fast Track designation by the U.S. Food and Drug Administration (FDA) and Orphan Drug status by the FDA and the European Medicines Agency (EMA) for ALS. For more information, visit |
| ● | BrainStorm Cell Therapeutics Inc. currently employs |
| ● | The Outbreak of the novel strain of coronavirus, SARS-CoV-2 (COVID-19) disease and Its Impact: |
The Outbreak of the novel strain of coronavirus, SARS-CoV-2 (COVID-19) disease has currently impacted and may continue to adversely impact our business, including our preclinical studies and clinical trials. In December 2019, a novel strain of coronavirus, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States, Europe and Israel, where the Company conducts its operations, as well as its clinical trials for NurOwn®. In response to the spread of COVID-19 and to ensure safety of employees and continuity of business operations, we closed our offices, with our administrative employees continuing their work remotely and limited the number of staff in any given research and development laboratory. Our research and development laboratory in Israel and manufacturing sites in U.S. remain open.
As of the date of this report, our U.S. Phase 2 PMS clinical trial has continued with slight delays in the pace of enrollment due to site access restrictions related to the global COVID-19 pandemic. Scheduled March and April 2020 new patient enrollments were deferred to May 2020 due to site closures related to COVID-19. As of June 2020, all the trial sites were back on track to continue with the trial. As of August 4, 2020, all 20 study participants have been enrolled in the study. The Company is currently collecting the clinical and biomarker data from treated patients. Dosing of all participants is expected to be completed in the fourth quarter of 2020. The Phase 3 ALS clinical trial continued to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19. As of July 2, 2020, the study completed dosing of all the participants in the Phase 3 ALS trial. The Phase 3 ALS trial is expected to generate top-line data by the end of November this year. The Company recently announced a new clinical program focused on the development of NurOwn® as a treatment for AD. As part of the newly announced program, the Company is planning a multi-national Phase 2 clinical trial in Europe to evaluate the safety and efficacy of NurOwn® treatment in patients with prodromal to mild AD.
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The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. Our management team is actively monitoring this situation and the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce. For additional information on risks posed by the COVID-19 pandemic, please see Part II, Item 1A – Risk Factors – Risks Related to the COVID-19 Pandemic.
Recent Highlights
| The Company has made significant progress in the past 12 months advancing the |
| On February 11, 2020, the Company announced that it recently held a high-level meeting with the FDA to discuss potential NurOwn® regulatory pathways for approval in ALS. In the planned meeting with senior Center for Biologics Evaluation and Research (CBER) leadership and several leading U.S. ALS experts, the FDA confirmed that the fully enrolled Phase 3 ALS trial is collecting relevant data critical to the assessment of NurOwn® efficacy. The FDA indicated that they would look at the "totality of the evidence" in the expected Phase 3 clinical trial data. Furthermore, based on their detailed data assessment, they are committed to working collaboratively with BrainStorm to identify a regulatory pathway forward, including opportunities to expedite statistical review of the data from the Phase 3 trial. |
| ● | The Company was granted FDA approval in December 2018 for the IND Application of |
| On March 6, 2020, the Company entered into a new Distribution Agreement (the “March 6, 2020 ATM”) with Raymond James & Associates, Inc. (the “Agent”). Under the March 6, 2020 ATM, the Company may sell from time to time or through the Agent shares of Common Stock, having an aggregate offering amount of up to $50 million. The Company filed a prospectus supplement, on March 6, 2020, with the U.S. Securities and Exchange Commission (the “SEC”) in connection with the March 6, 2020 ATM. During the quarter ended June 30, 2020, the Company sold an aggregate of 1,162,527 shares of Common Stock pursuant to the March 6, 2020 ATM at an average price of $6.57 per share, raising gross proceeds of approximately $7.64 million. Since its inception on March 6, 2020 through the quarter ended June 30, 2020, the Company sold an aggregate of 1,499,014 shares of Common Stock at an average price of $6.27 per share, raising gross proceeds of approximately $9.40 million. From July 1, 2020 through July 31, 2020, the Company sold an aggregate of 945,082 additional shares of Common Stock pursuant to the March 6, 2020 ATM, at an average price of $14.48 per share, raising additional gross proceeds of approximately $13.69 million. |
| ● | On March 7, 2019, the Israeli MoH |
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| On |
| ● | On April 3, 2020, the Company announced that its wholly owned subsidiary, BrainStorm Cell Therapeutics Ltd., has been awarded a non-dilutive grant of approximately $1.5 million by the Israel Innovation Authority (IIA). The grant enables the Company to continue development of advanced cellular manufacturing capabilities, furthers the development of MSC-derived exosomes as a novel therapeutic platform, and will ultimately enable BrainStorm to expand its therapeutic pipeline in neurodegenerative disorders. As of June 30, 2020, the Company has received $583,000 out of the $1.5 million awarded. |
| ● | On May 4, 2020, the Company announced new data highlighting the immunomodulatory effects of NurOwn® on B and T regulatory function in an online supplement to peer reviewed journal ‘Neurology’. |
| ● | On May 7, 2020, the Company announced it will be leasing of a new cleanroom facility, which includes three state-of-the-art cleanrooms, at the Tel Aviv Sourasky Medical Center to manufacture NurOwn® for The European Union (EU). The new facility will significantly increase the Company’s capacity to manufacture and ship its product into the EU and the local Israeli market. The cleanroom facility is part of Sourasky’s Institute for Advanced Cellular Therapies. |
| ● | On May 27, 2020, the Company appointed pharmaceutical veteran Stacy R. Lindborg, Ph.D. as Executive Vice President, Head of Global Clinical Research. Dr. Lindborg is an experienced healthcare |
| On June 9, 2020, the Company announced that The |
| ● | On June 15, 2020, the Company announced that it has been granted Small and Medium-Sized Enterprise (SME) status by the European Medicines Agency’s (EMA) Micro, Small and Medium-Sized Enterprise (SME) office. |
| ● | On June 24, 2020, the Company announced a new clinical program focused on the development of NurOwn® as a treatment for AD. As part of the newly announced program, the Company is planning a multi-national Phase 2 clinical trial in Europe to evaluate the safety |
| ● | On June 29, 2020, the Company’s shares joined the Russell 2000® Index and the broad-market Russell 3000® Index. |
| ● | On July 1, 2020, the Company received a non-dilutive bonus payment of $700,000 from California Institute for Regenerative Medicine (CIRM) for treating more California participants than originally proposed in its Phase 3 ALS |
| ● | On July 2, 2020, the Company announced the completion of all dosing of participants in its NurOwn® Phase 3 ALS clinical trial. |
| ● | On July 8, 2020, the Company hosted a KOL webinar to discuss NurOwn® Phase 2 AD Program. The |
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| Netherlands; and Bruno Dubois, M.D., Ph.D., Professor of Neurology at the Neurological Institute of the Salpétrière University Hospital in Paris, France. |
| ● | On July 23, 2020, the Company announced a groundbreaking pre-clinical study of NurOwn® derived Exosome-based treatment for COVID-19 ARDS. Intratracheal administration of exosomes extracted from MSC’s using NurOwn® technology resulted in statistically significant improvement in multiple lung parameters in a mouse model. With this study, the Company has successfully completed its first milestone in developing an innovative exosome-based platform-technology for the treatment severe COVID-19 infection. |
NurOwn®Proprietary Technology
NurOwn® technology is based on an innovative and proprietary manufacturing protocol, which induces the differentiation of purified and expanded bone marrow-derived mesenchymal stem cells (“MSC”) and consistently generates cells that release high levels of multiple neurotrophic factors (“MSC-NTF” cells) to modulate neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and improve neurological function. These neurotrophic factors that are known to be critical for the growth, survival and differentiation of neurons, include:including: glial-derived neurotrophic factor (“GDNF”); brain-derived neurotrophic factor (“BDNF”); vascular endothelial growth factor (“VEGF”); and hepatocyte growth factor (“HGF”), among others. GDNF is one of the most potent survival factors for peripheral motor neurons. VEGFneurons and HGF have demonstrated important neuroprotective effects in ALS, and other neurodegenerative diseases. Neuroinflammation is a prominent and early feature of ALSMS, AD and other neurodegenerative diseases as well as modulating neuroinflammation, a prominent, consistent and early feature of Progressive MS.
these diseases.
NurOwn® manufacturing involves a multi-step process that includes: harvesting and isolating undifferentiated stem cells from the patient's own bone marrow; processing and isolating the undifferentiated stemof cells at the manufacturing site and cryopreserving thesite; cryopreservation of MSC to enable multiple treatments from a single bone marrow aspiration. In advance of each treatment cycle, the MSC are thawed differentiation is induced;sample; and MSC-NTF cells are injected by intrathecal (“IT”) administrationinjection of MSC-NTF cells into the same patient by a standard lumbar puncture. This administration procedure does not require hospitalization and has been shown to be safe and well tolerated in multiple CNS clinical trials to date. The ongoingfully dosed NurOwn® U.S. Phase 3 ALS andstudy, the ongoing NurOwn® U.S. Phase 2 MS studiesPMS study and the planned EU Phase 2 clinical trial in prodromal to mild AD are all evaluating the therapeutic potential of repeated IT dosingintrathecal MSC-NTF cell administration (three doses at bi-monthly intervals).
The proprietary technology and manufacturing processing of NurOwn® (MSC-NTF cells) for clinical use is conducted in full compliance with current Good Manufacturing Practice (“cGMP”). The NurOwn® proprietary technology is fully licensedowned to andor developed by BrainstormBrainStorm Cell Therapeutics Ltd., our wholly-ownedwholly owned subsidiary (the “Israeli Subsidiary”). All granted patents related to NurOwn® (MSC-NTF cells) manufacturing process are fully assigned to or owned by BrainStorm Cell Therapeutics Ltd. (see Intellectual Property section for details).
The NurOwn® Transplantation Process
| Bone marrow aspiration from the patient; |
| MSC Isolation and propagation; |
| MSC Cryopreservation; |
| MSC thawing and differentiation into neurotrophic-factor secreting (MSC-NTF; NurOwn®) cells; and |
| Autologous transplantation into the patient’s cerebrospinal fluid by IT injection (standard lumbar puncture). |
Differentiation before Transplantation
The ability to induce autologous adult mesenchymal stem cells into differentiated MSC-NTF cells makes NurOwn® uniquely suited for the treatment of neurodegenerative diseases.
The specialized MSC-NTF cells secrete multiple neurotrophic factors and immunomodulatory cytokines that may result in:
| Protection of existing neurons; |
| Promotion of neuronal repair; |
| Neuronal functional improvement; and |
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| Immunomodulation and reduced neuroinflammation. |
Autologous (Self-transplantation)
The NurOwn® technology platform is autologous, using the patient’s own bone-marrow derived stem cells for “self-transplantation.” In autologous transplantation, there is no introduction of unrelated donor antigens that may lead to alloimmunity, 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 several ethical concerns associated with the use of embryonic-derived stem cells in some countries.
TheNurOwn® ALS Clinical Program
NurOwn® is currently in a Phase 3 late stage clinical development program for the treatment of ALS. It has been granted Fast Track designation by the U.S. Food and Drug Administration (“FDA”) for this indication, and has been granted Orphan Drug Status, in the U.S. and Europe, which provides the potential for an extended period of exclusivity. We have
Phase 1/2 ALS Open Label Trials
The company has completed two early stage Phase 1/2 and Phase 2 open-label clinical trials of NurOwn® in patients with ALS at the Hadassah Medical Center (“Hadassah”) in Jerusalem, Israel, as well as a Phase 2 double-blind, placebo-controlled, multicenter clinical trial at three prestigious U.S. Medical centers - the Massachusetts General Hospital (MGH) in Boston, Massachusetts Memorial Hospital in Worcester, Massachusetts, and the Mayo Clinic in Rochester, Minnesota - all highly experienced in the management and investigation of ALS.
Phase 1/2 ALS Open Label Trials
The first two open-label trials were approved by the Israeli Ministry of Health (“MoH”). The first-in-human trial, a Phase 1 safety and efficacy trial of NurOwn® administered either intramuscularly or intrathecally in 12 ALS patients, was initiated in June 2011. In the Phase 2 dose-escalating study, 14 ALS patients were administered NurOwn® by a combined route of intramuscular and intrathecal administration. These studies demonstrated the safety of NurOwn® by both routes of administration and showed preliminary signs of efficacy.
In January 2016, the results of the two completed Phase 1/2 study and Phase 2 open label trials were published in JAMA Neurology. The data publishedThis demonstrated a slower rate of disease progression following MSC-NTF cell transplantation as measured by the ALS Functional Rating Score (“ALSFRS-R”), the gold standard for the evaluation of ALS functional status, and Forced Vital Capacity (“FVC”), a measure of pulmonary function, as well as positive trends in the rate of decline of muscle volume and the compound motor axon potential (“CMAPs”). This was the first published clinical data using autologous mesenchymal stem cells, induced under culture conditions to produce NTFs, with the potential to deliver acombined neuroprotective and immunomodulatory therapeutic effect in ALS and potentially modify the course of this disease.
Phase 2 ALS Randomized Trial
The Phase 2 U.S. study was conducted under an FDA Investigational New Drug (“IND”) application. This randomized, double-blind, placebo-controlled multi-center U.S. Phase 2 clinical trial evaluating NurOwn® in ALS patients was conducted at three clinical sites: (i) the Massachusetts General Hospital (MGH) in Boston, (ii) Massachusetts Memorial Hospital in Worcester, Massachusetts, and (iii) the Mayo Clinic in Rochester, Minnesota. For this trial, NurOwn® was manufactured at the Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute in Boston and at the Human Cellular Therapy Lab at the Mayo Clinic. In this study, 48 patients were randomized 3:1 to receive NurOwn® or placebo.
Topline data fromResults of this Phase 2 Study were announced bypublished in the Companypeer reviewed Journal ‘Neurology’. The publication entitled “NurOwn®, Phase 2, Randomized, Clinical Trial in July 2016. Further details were presented by investigators Dr. Robert BrownPatients With ALS: Safety, Clinical, and Dr. James Berry, at the 15th Annual Meeting of the Northeast ALS Consortium (NEALS) in October 2016 and by Dr. Berry at the 27th International Symposium on ALS/MND, in Dublin, Ireland,Biomarker Results” was published in December 2016. 2019.
Key findings from the trial were as follows:
| The study achieved its primary objective, demonstrating that NurOwn® transplantation was safe and well-tolerated. There were no discontinuations from the trial due to AEs and there were no deaths in the study. The most common adverse events (of mild or moderate severity), were transient procedure-related AEs such as headache, back pain, pyrexia arthralgia and injection-site discomfort, which were more commonly seen in the NurOwn®-treated participants compared to placebo. |
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| NurOwn® achieved multiple secondary efficacy endpoints, showing evidence of a clinically meaningful benefit. Notably, response rates in the ALS functional rating scale (48-point ALSFRS-R outcome measure) were higher in NurOwn®-treated participants, compared to placebo, at all study timepoints over 24 weeks. |
| A pre-specifiedresponder analysis examined percentage improvements in the post treatment ALSFRS-R slope |
| The beneficial treatment effects were greater in therapid progressor subgroup (in which pretreatment ALSFRS-R |
| As an important confirmation of NurOwn®’s mechanism of action, levels of neurotrophic factors and inflammatory markers were measured in the cerebrospinal fluid (“CSF”) samples collected from participants |
| In summary, a higher proportion of NurOwn® treated participants, particularly those with more rapid disease progression, experienced stabilization or improvement in ALS function, as measured by the post-treatment vs. pre-treatment ALSFRS-R slope change. These are new and meaningful ALS clinical observations that are being evaluated in the ongoing Phase 3 study using repeat dosing in ALS rapid progressors. |
Phase 3 ALS Clinical Trial
Following successful completion of the single dose Phase 2 US study, the Company commencedis currently conducting a repeat-dose Phase 3 trial (a multi-dose double-blind, placebo-controlled, multicenter trial protocol) that has been designed to generate data to support a Biologic License Application (“BLA”) for NurOwn® in ALS. In October 2019 the CompanyThe clinical trial has completed enrollment in the Phase 3 ALS clinical trialenrolment and dosing of an enriched clinical trialpatient population of rapid progressors (~50% of ALS patients) based on superior outcomes observed in Phase 2 in thisthe Phase-2 pre-specified sub-group.
The primary clinical efficacy outcome measure is the ALSFRS-R score responder analysis, an outcome that evaluates the proportion of treated participants who achieve a prespecified level of improvement in the ALSFRS-R post-treatment slope. The Phase 3 trial expands biomarker evaluations to further understand their potential to predict ALS disease progression, treatment response and confirm the biology of NurOwn® in a larger study population. The study is being conducted at 6six leading U.S. medical centers, 3three of which participated in the prior Phase 2 study. Patient enrollment commenced in October 2017, at Massachusetts General Hospital followed by the other 5five study sites:sites, including University of California Irvine Medical Center, University of Massachusetts Medical Center, Mayo Clinic in Rochester, Minnesota, the California Pacific Medical Center in San Francisco, and Cedars Sinai Medical Center in Los Angeles.
The Phase 3 ALS clinical trial completed enrollment in October 2019 and continued to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19. Dosing of all participants in the trial was completed as of July 2, 2020. Top-line efficacy data is expected by the end of November this year. The study is registered at www.clinicaltrials.gov (ClinicalTrials.gov Identifier: NCT03280056).
The independent Data Safety Monitoring Board (“DSMB”) for the study completed theits first pre-specified interim analysis of safety outcomes for the first 31 participants treated with NurOwn® in the Phase 3 trial in ALS (www.clinicaltrials.gov Identifier NCT03280056)(NCT03280056) in August 2018. The DSMB indicated there were no significant safety concerns and recommended that the trial continue, as planned without any modifications to the study protocol.
The DSMB completed theits second pre-specified interim analysis of safety outcomes for 106 participants treated with NurOwn® in the Phase 3 ALS trial on October 28, 2019. The DSMB indicated that the trial should continue without any modifications to the study protocol, and the DSMB chair indicated that they did not identify any significant safety concerns.
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Top-line efficacy data is expected in the fourth quarter of 2020.
The Company has developed a validated cryopreservation process for the long-term storage of MSC, that allows multiple doses of NurOwn® to be created from a single bone marrow aspirateharvest procedure in the multi-dose clinical trial and to avoid the need for patients to undergo repeated bone marrow aspiration. A validation study was conducted in 2017 comparing NurOwn® derived from fresh MSC to those derived from cryopreserved MSC. Company scientists were successful in showing that the MSC can be stored in the vapor phase of liquid nitrogen for prolonged periods of time, while maintaining their characteristics. Cryopreserved MSC are capable of differentiating into NurOwn®, similar to the NurOwn® derived from fresh MSC from the same patient/donor, prior to cryopreservation and maintain their key functional properties including immunomodulation and neurotrophic factor secretion.
The Company has contracted with the City of Hope's Center for Biomedicine and Genetics to produce clinical supplies of NurOwn® adult stem cells for the ongoing U.S. Phase 3 ALS clinical study. City of Hope is currently supporting the production of NurOwn® and placebo for the participants treated in the Phase 3 trial. The Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute (DFCI) in Boston has also been contracted to manufacture NurOwn® and placebo for the Phase 3 ALS clinical study participants and commenced manufacturing in October 2018. As of March 2019, The twoDFCI core manufacturing facilities arefacility is also manufacturingsupplying NurOwn® for the U.S. Phase 2 study in progressive MS.PMS study.
Special meeting with FDA senior management
In July 2019, the BrainstormBrainStorm management team was invited to participate in a special in-person, high-level meeting with the senior management of the FDA’sU.S. Food and Drug Administration’s (FDA) Drug and Biologics Centers and, ’I‘I AM ALS’, a grassroots ALS advocacy group advocating for an ALS cure.
FDA’s Dr. Peter Marks, Director of the Center for Biologics Evaluation and Research (CBER) and Dr. Janet Woodcock Director of the Center for Drug Evaluation and Research (CDER) were in attendance with senior FDA staff. Brainstorm’sBrainStorm’s Phase 3 ALS principal Investigators Dr. Robert Brown (Massachusetts Memorial Hospital, Worcester, Massachusetts) and Dr. Merit Cudkowicz (Massachusetts General Hospital, Boston) joined by teleconference.
The meeting’s purpose was to discuss Brainstorm’sBrainStorm’s ongoing Phase 3 ALS clinical trial as well as efforts to speed treatment access to the ALS patient community. The meeting enabled an open and effective dialogue between the FDA and Brainstorm,BrainStorm, setting the stage for future meetings to explore practical options to quickly bring our investigational treatment to those living with ALS.
On February 11, 2020, the Company announced that it recently held a high-level meeting with the FDA to discuss potential NurOwn® regulatory pathways for approval in ALS. In the planned meeting with senior Center for Biologics Evaluation and Research (CBER) leadership and several leading U.S. ALS experts, the FDA confirmed that the Phase 3 ALS trial is collecting relevant data critical to the assessment of NurOwn® efficacy. The FDA indicated that they would look at the "totality of the evidence" in the expected Phase 3 clinical trial data. Furthermore, based on their detailed data assessment, they are committed to working collaboratively with BrainStorm to identify a regulatory pathway forward, including opportunities to expedite statistical review of data from the Phase 3 trial.
Patient Access Programs (ALS)
The Company, working collaboratively with the Tel Aviv Sourasky Medical Center (Ichilov Hospital), was approved on March 7, 2019 to treat up to 13 ALS patients with NurOwn®, under the Israel Hospital Exemption regulatory pathway for Advanced Therapy Medicinal Products (ATMP), which was adopted by the Israeli Ministry of Health (MoH) from the European Medicine Agency (EMA) regulation. This pathway will enableenables the Company to make NurOwn® accessible to ALS patients in Israel, for a fee. EightThis approval expired on March 7, 2020. The Hospital has since then received approval from the MoH for the extension of the program. Based on the approval, the Company has enrolled 12 out of the first 13 patients under the HE regulatory pathway as of June 30, 2020 and intends to enroll the maximum number of patients that have been enrolledapproved. The Company is currently collecting clinical data for patients who have already received treatment at the Ichilov Hospital. Thus far, the Company has received $3.4 million in this program so far.gross proceeds in connection with the treatment of the aforementioned patients.
NurOwnNurOwn® in Progressive Multiple Sclerosis
On December 15, 2018, the FDA approved the Company's IND to conduct a Phase 2 open label trial of repeated intrathecal administration of NurOwn® in progressive MSProgressive Multiple Sclerosis (www.clinicaltrials.gov Identifier NCT03799718). The study entitled ‘A Phase 2, open-label, multicenter study to evaluate the safety and efficacy of repeated administration of NurOwn® (Autologous
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Mesenchymal Stem Cells Secreting Neurotrophic Factors; MSC-NTF cells) in participants with Progressive Multiple Sclerosis (MS)(PMS)’ will recruit 20 progressive MS patientsPMS participants at 5 leading US MS centers.
On December 18, 2019, the clinical trial independent Data Safety Monitoring Board (DSMB) for the U.S. Phase 2 PMS study completed the first, pre-specified interim analysis, of safety outcomes for the first 9 participants enrolled in the study. After careful review of all available clinical trial data, the DSMB unanimously concluded “the study should continue as planned without any protocol modification”.
On November 14, 2019 the Company received a $495,330 grant from the National Multiple Sclerosis Society (NMSS), through its Fast Forward program, for serum and CSF biomarkers analysis in BrainStorm’s Phase 2 open-label, multicenter clinical trial of repeated intrathecal administration of NurOwn® in participants with PMS.
The Phase 2 PMS trial faced slight delays in enrollment due to the COVID-19 pandemic. Scheduled March and April 2020 new participant enrollments were deferred to May 2020 due to site closures related to COVID-19. As of September 2019,June 2020, all trial sites were back on track to continue with the MS clinical trial enrolled the first 8trial. As of August 4, 2020, all 20 study participants have been enrolled in the study. The Company is currently collecting the clinical and biomarker data from treated patients. Dosing of all participants is expected to generate top line databe completed in the second halffourth quarter of 2020.
NurOwn® in Alzheimer’s Disease
The Company is designing a multi-national Phase 2 clinical trial to evaluate the safety and pharmacodynamics of NurOwn® treatment in patients with prodromal to mild Alzheimer's disease (AD). The 52-week study is expected to enroll 40 participants with prodromal to mild AD that will receive three intrathecal NurOwn® doses 8 weeks apart. Inclusion criteria include well-defined clinical criteria for prodromal to mild AD as well as CSF biomarker defined criteria for AD.
The Phase 2 clinical trial will evaluate safety and pharmacodynamics of NurOwn®, including effects on inflammatory, Alzheimer’s-specific, neurodegenerative, and synaptic biomarkers, as well as a range of key clinical measures of cognition and function. The clinical trial will be conducted at the Brain Research Center affiliated with the Alzheimer Center Amsterdam, Pitié-Salpêtrière Hospital (Paris), and several other clinical trial sites in the Netherlands and France.
The lead investigators for the trial are two world renowned clinical experts in AD: Prof. Philip Scheltens, M.D., Ph.D., and Prof. Bruno Dubois, M.D., Ph.D. Prof. Scheltens, the principal investigator (PI) of the study, is Professor of Cognitive Neurology and Director of the Alzheimer Centre at Amsterdam University Medical Center. He has extensive experience as a principal investigator in many international clinical trials in this field. Prof. Dubois, the French national coordinator of the study, is Professor of Neurology at the Neurological Institute of the Salpétrière University Hospital. He is the past President of the Scientific Committee of France-Alzheimer, President of IFRAD (International Fund Raising for Alzheimer's Disease) as well as a member of the European Alzheimer Disease Consortium (EADC).
While many Alzheimer's therapies have focused on a single target such as tau or beta-amyloid, NurOwn® has the capability to simultaneously target multiple relevant biological pathways and bring a comprehensive approach to this multifactorial disease. Importantly, NurOwn®’s mechanism of action may allow the therapy to enable synergistic combinations with anti-tau or anti-beta-amyloid treatments, further underscoring its potential to address critical unmet needs in AD. In such a complex disease, addressing inflammation and neuroprotection is an innovative approach and a first in the world for this technology.
On July 8, 2020, the Company hosted a KOL webinar to discuss its NurOwn® Phase 2 AD Program. The webinar featured presentations from Prof. Scheltens and Prof. Dubois, the lead investigators in the trial. For more information on the KOL webinar and presentation, visit BrainStorm's website at www.brainstorm-cell.com.
Non-Dilutive Funding
In July 2017, the Company was awarded a grant in the amount of $15,912,000$15,912,390 from the California Institute for Regenerative Medicine (CIRM) to aid in funding the Company’s pivotal Phase 3 study of NurOwn®, for the treatment of ALS. To date, theThe Company has received $12,550,000 of the CIRM grant:grant from 2017-2019: $9,050,000 from 2017 through 2018, and an additional $3,500,000 in 2019. On March 16, 2020, the Company announced that it had received an additional $2,200,000 from CIRM for achieving its pre-determined milestones. With the receipt of this grant, the Company has now received $14,750,000 of the total available $15,912,390 grant funding
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awarded by CIRM. The grant does not bear a royalty payment commitment nor is the grant otherwise refundable. The Company expects to receive approximately $3,300,000$1,162,390 in additional grant funding from CIRM upon achieving certain milestones.
In 2018 and 2019,On April 3, 2020, the Company wasannounced that its wholly owned subsidiary, BrainStorm Cell Therapeutics Ltd., has been awarded aggregate grantsa new non-dilutive grant of approximately $3$1.5 million fromby the Israel Innovation Authority (“IIA”). To dateThe grant enables the Company to continue development of advanced cellular manufacturing capabilities, furthers development of MSC-derived exosomes as a novel therapeutic platform, and will ultimately enable BrainStorm to expand the therapeutic pipeline in neurodegenerative disorders. As of June 30, 2020, the Company has received approximately $2.6$583,000 out of the $1.5 million awarded.
On June 9, 2020, the Company announced that The ALS Association and I AM ALS have awarded the Company a combined grant of $500,000 to support an ALS biomarker research study. The grant will be used to draw insights from IIA, made underdata and samples collected from patients enrolled in BrainStorm's ongoing Phase 3 clinical trial of its NurOwn® treatment, to further understanding of critical biomarkers associated with treatment response for people with ALS.
On July 1, 2020, the 2019 as well as under previous IIA grants. The Company expects to receive approximately $500,000received a non-dilutive bonus payment of $700,000 from CIRM for treating more California participants than originally proposed in additional grant funding from IIA upon achieving certain milestones.its Phase 3 ALS trial.
Intellectual Property
A key element of the Company’s overall strategy is to establish a broad portfolio of patents and other methods described below to protect its proprietary technologies and products. BrainstormBrainStorm is the sole licensee or assignee of 1415 granted patents 24 allowed patents and 2422 patent applications in the United States, Europe, and Israel, as well as in additional countries worldwide, including countries in the Far East Asia and South America (in calculating the number of granted patents, each European patent validated in multiple jurisdictions iswas counted as a single patent).
In March 2019, the European Patent Office ("EPO") granted a European-wide patent titled 'Mesenchymal‘Mesenchymal Stem Cells for the treatment of CNS Diseases.'’ The European Patent Application published in the European Patent Bulletin 19/13 on March 27, 2019, under Patent No. 2620493. The allowed claims cover the isolated cells as well as their use in the manufacture of a medicament for treating a CNS disease or disorder, selected from the group consisting of: Parkinson's,Parkinson’s, multiple sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis, diabetic neuropathy, glaucomatous neuropathy, Alzheimer'sAlzheimer’s disease and Huntingdon'sHuntington’s disease.
On April 9,August 27, 2019, the Canadian Intellectual Property Office issued a Notice of Allowance forgranted Canadian Patent Application No. 2,877,223 entitled ‘Methods of Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors’. The allowed claims cover the method for generating the Mesenchymal Stem Cells Secreting Neurotrophic Factors (MSC-NTF cells).
On September 16, 2019, the United States Patent and Trademark Office (USPTO) issued a Notice of Allowance for BrainStorm'sBrainStorm’s new US Patent Application, number: 15/113,105, titled: ‘Method of Qualifying Cells'Cells’. The allowed claims cover a pharmaceutical composition for MSC-NTF cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived MSCs that secrete neurotrophic factorsfactors.
On October 21, 2019, the Japan Patent Office (JPO) issued a decision to Grant Japanese Patent Application, number: 2016-548691, titled: ‘Method of Qualifying Cells.’ The patent covers cell populations which are therapeutic for the treatment of ALS and the method of qualifying the cells for therapeutic use.
On December 6, 2019, the Hong Kong Patent Office sealed patent No. HK1182133 titled ‘Mesenchymal Stem Cells for the treatment of CNS Diseases’.
On January 27, 2020, the Israeli patent Office allowed application number 246943 titled ‘Method of Qualifying Cells’. The allowed claims cover a method of qualifying whether a cell population is a suitable therapeutic for treating Amyotrophic Lateral Sclerosis (ALS) and an isolated population of cells that secrete neurotrophic factors which are qualified useful as a therapeutic for treating ALS.
On January 29, 2020, the European Patent Office (EPO) communicated its intention to grant a European patent titled ‘Methods of Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors’. Allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).
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On February 18, 2020, the US Patent and Trademark Office (USPTO) issued US Patent No. 10,564,149 titled ‘Populations of Mesenchymal Stem Cells That Secrete Neurotrophic Factors’. The allowed claims cover a pharmaceutical composition for MSC-NTF cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived MSCs that secrete neurotrophic factors.
Patents protecting NurOwn® have been issued in the United States, Japan, Europe, Hong-KongHong Kong, and Israel.
For a complete list of our patent portfolio, please refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Scientific presentationsand Industry Presentations in 2019
2020
On January 11, 2019,12, 2020, Mr. Chaim Lebovits presented at the 3rd Annual Neuroscience Innovation Forum at the Marines’ Memorial Club in San Francisco, California.
On January 12, 2020, Dr. Ralph Kern provided an updateMD MHSc participated on the Phase 3 pivotal trial of the autologous MSC-NTF Cellular Therapy (NurOwn®) in ALSa Rare & Orphan Diseases Panel at the 9th3rd Annual Neuroscience Innovation Forum at the Marines’ Memorial Club in San Francisco, California.
On January 24, 2020, Dr. Ralph Kern MD MHSc delivered a podium presentation entitled “CIRM funded Stem Cell Clinical Trials in California – Updates” at the 10th Annual California ALS Research Summit hosted at the Cedars-Sinai Medical Center, Los Angeles, California.
On February 11, 2020, Mr. Chaim Lebovits presented at BIO CEO and Investor Conference at the Marriott Marquis in Irvine, CA. The California ALS Research Summit is an annual meeting of researchers, investigators, clinicians, biotech companies, government representatives, partner organizations, and advocates in ALS and related fields in CaliforniaNew York City, New York.
Two scientific abstracts wereOn February 17, 2020, Dr. Ralph Kern MD MHSc presented at the 71st American Academy of Neurology (AAN)Noble Capital Markets’ Sixteenth Annual Meeting in Philadelphia, PA, May 4-10, 2019. The scientific abstracts included: a detailed molecular characterization of enhanced neurotrophic factor production by NurOwn® (MSC-NTF cells); and correlations of cerebrospinal fluid biomarkers with clinical improvement that was selected by the AAN Science Committee, for a platform presentationInvestor Conference at the prestigious Emerging Science Session. These findings contribute to our overall understanding of the mechanism of action of NurOwn®Hard Rock Hotel and provide further evidence linking ALS clinical outcomes to highly relevant disease biomarkers.
Casino, Hollywood, Florida.
On May 31, 2019,June 8, 2020, Dr. Ralph Kern MD MHSc provided a corporate overview at the World Multiple Sclerosis (MS) Day, a global event that raises awareness of the invisible symptoms of MS, BrainstormBIO Digital 2020 Virtual Conference.
On June 18, 2020, Dr. Ralph Kern MD MHSc presented a poster of the Company’s Phase 2 Open-Label, Multicenter Study of Repeated Intrathecal Administration of Autologous MSC-NTF cells in Progressive MScorporate overview at the Annual Meeting of the Consortium of Multiple Sclerosis Centers (CMSC), in Seattle. CMSC is the largest North American gathering for healthcare professionals and researchers engaged in MS care. The poster presented the Phase 2 study design and population, as well as the study endpoints and its current status.Raymond James Virtual Human Health Innovations Conference.
On October 2, 2019 Brainstorm presented NurOwn® Phase 2 biomarker data at the 18thAnnual NEALS Meeting held October 2-4, 2019 in Clearwater, Florida, discussing the evolving landscape of ALS clinical trials and potential surrogate and functional endpoints for regulatory approval.
Research and Development
The Company is also reviewing the potential for clinical development of NurOwn® in otherseveral neurodegenerative disorders such as Parkinson’s disease, and Huntington’sneurodegenerative eye disease. Research is currently ongoing to develop additional specialized derivative cell products such as MSC-NTF derived Exosomes. Exosomes are extracellular nano-vesicles (secreted by the cells) that carry various molecular components of their cell of origin, including nucleic acids, proteins, and lipids. Exosomes can transfer molecules from one cell to another, via membrane vesicle trafficking, thereby mediating cell-to-cell communication, ultimately regulating many cell processes, which are suitable for clinical applications in multiple neurodegenerative diseases. NurOwn® derived exosomes may possess unique features for the enhanced delivery of therapeutics to the brain, due to their ability to cross the blood brain barrier and penetrates withinto penetrate the brain and spinal cord. The research efforts are primarily focused on:
| 1. | Manufacturing of MSC-NTF |
| a. | Developing and optimizing large scale cell culture processes using bioreactors, to generate exosomes. |
| b. |
| 2. | Quantification, characterization of phenotype and exosome cargo. |
| 3. | Assessment of MSC-NTF exosomes |
| 4. | Establishment of a method for exosomes modification. |
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For the ongoing multidose clinical studies in ALS and MS, the Company has improved the efficiency of NurOwn® production and improved its stability, allowing manufacturing to take place at centralized clean room facilities from which NurOwn® is distributed to the clinical trial sites, where the cells are then administered to patients. The Company is also engaged in several research initiatives to further improve and scale-up manufacturing capacity and extend the shelf life of NurOwn®.
Corporate Information
We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 1325 Avenue of Americas, 28th28th Floor, New York, NY 10019, and our telephone number is (201) 488-0460. We also maintain offices at 3 University Plaza Drive,12 N State Route 17, Suite 320, Hackensack,201, Paramus, NJ 07601,07652, and in Petach Tikva, Israel. We maintain an Internet website at http://www.brainstorm-cell.com.www.brainstorm-cell.com. The information on our website is not incorporated into this quarterlyQuarterly Report on Form 10-Q.
Results of Operations
For the period from inception (September 22, 2000) through SeptemberJune 30, 2019,2020, the Company has not earned any revenue from operations. The Company does not expect to earn revenue forfrom operations in the foreseeable future. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates.near-term. The Company has incurred operating costs and other expenses of approximately $5,551,000$7,400,000 during the three months ended SeptemberJune 30, 20192020 compared to $3,232,000$4,857,000 during the three months through SeptemberJune 30, 2018. The increase of $2,319,000 is due to higher expenses in connection with the ongoing U.S. Phase 3 Clinical Trial.
2019.
Research and Development Expenses:
Research and development expenses, net for the three months ended SeptemberJune 30, 2020 and 2019 were $5,694,000 and 2018 were $4,008,000 and $1,975,000,$3,554,000, respectively, representing an increase of $2,033,000.$2,140,000. This increase is due to (i) an increase of $1,183,000$200,000 in connection with the Phase 3 Clinical Trial;material and other costs; (ii) an increase of $433,000 in connection with materials,$769,000 for costs related to payroll and stock-based compensation expenses, patents and other activities;expenses; (iii) thea decrease of $1,952,000$1,760,000 in participation of the Israel Innovation Authority (“IIA”) and CIRM, in 2019, under various awarded grants. This increase was partially offset by (i) $1,512,000grants and (iv) a decrease of $900,000 in proceeds received in connection with the treatment of patients under the hospital exemption regulatory pathway;pathway. This increase was partially offset by (i) a decrease of $1,401,000 in costs related to the Phase 3 and Phase 2 Clinical Trials from $5,214,000 in three months ended June 30, 2019 to $3,813,000 for the three months period ended June 30, 2020 and (ii) a decrease of $23,000 for costs related to$88,000 in connection with patents, travel and other costs.
activities.
Excluding participation from IIA and CIRM under the grants and proceeds received under the hospital exemption regulatory pathway, research and development expenses increaseddecreased by $1,594,000$520,000 from $4,069,000$6,535,000 in the thirdsecond quarter of 20182019 to $5,663,000$6,015,000 in the thirdsecond quarter of 2019.2020.
General and Administrative Expenses:
General and administrative expenses for the three months ended SeptemberJune 30, 2020 and 2019 were $1,706,000 and 2018 were $1,543,000 and $1,257,000,$1,303,000, respectively. The increase in general and administrative expenses of $286,000$403,000 is primarily due to an increase of $307,000$453,000 in payroll and stock-based compensation, consultants and an increase of $48,000 in rent and other costs. This increase was partially offset by athe decrease of $21,000$98,000 in travelPR costs, consultants and stock management costs.
travel.
Other Income and Expenses:
Financial expenseincome for the three months ended SeptemberJune 30, 20192020 was $83,000$6,000 as compared to financial incomeexpense of $56,000$43,000 for the three months ended SeptemberJune 30, 20182019 as a result of the adoption of the Accounting Standard Update ASU 2016-02 “Leases”.
and due to conversion exchange rates.
Net Loss:
Net loss for the three months ended on SeptemberJune 30, 20192020 was $5,634,000,$7,394,000, as compared to a net loss of $3,176,000$4,900,000 for the three months ended SeptemberJune 30, 2018.2019. Net loss per share for the three months ended SeptemberJune 30, 20192020 and 20182019 was $0.25 and $0.15,$0.23, respectively.
The weighted average number of shares of Common Stock used in computing basic and diluted net loss per share for the three months ended SeptemberJune 30, 20192020 was 22,254,993,29,274,130, compared to 20,691,90021,703,001 for the three months ended SeptemberJune 30, 2018.2019.
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Liquidity and Capital Resources
The Company has financed its operations since inception primarily through public and private sales of its Common Stock and warrants, andthe exercise of warrants, the issuance of convertible promissory notes.
notes, sales via the ATM program and through various grants.
Cash, Cash equivalents (including short-term bank deposits) amounted to approximately $2,129,000.$16,193,000 as of June 30, 2020.
Net cash used in operating activities was $3,626,000$5,662,000 for the three months ended SeptemberJune 30, 2019.2020. Cash used for operating activities was primarily attributed to reduction in outstanding trades payables, cost of payroll, rent of clean rooms and materials for clinical trials, rent, legal expenses and public relationsPR expenses. Net cash provided byused in investing activities was $1,439,000$2,070,000 for the three months ended SeptemberJune 30, 2019,2020, mainly representing net decreaseincrease in short-term interest-bearing bank deposits. Net cash provided by financing activities was $3,156,000$7,414,000 for the three months ended SeptemberJune 30, 20192020 and is attributable to the exercise of options and sales of shares under our ATM Program.
On June 8, 2018, we filed a shelf registration statement on Form S-3 (File No. 333-225517) (the “Shelf Registration Statement”), which was declared effective by the SEC on June 29, 2018, relating to Common Stock, warrants and units that we may sell from time to time in one or more offerings, up to a total dollar amount of $100,000,000. Other than the supplements filed on June 11, 2019 and on March 6, 2020 in connection with the ATM offerings discussed below, and the prospectus supplement filed on March 6, 2020 in connection with the registered direct offering discussed below, we have not filed any supplemental prospectus defining particular terms of securities to be offered under the shelf registration statement.
At-the-market (ATM) Offerings:
On June 11, 2019, the Company entered into a Distribution Agreement with Raymond James & Associates, Inc. (“Agent”), pursuant to which the Company sold, through the Agent, shares of Common Stock having an aggregate offering price of $20,000,000 (the “June 11, 2019 ATM”) in an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, by sales made directly on the Nasdaq Capital Market. On February 21, 2020, the Company completed the sale of all remaining shares issuable under the June 11, 2019 $20 million Distribution Agreement with Raymond James & Associates, Inc. and exhausted its full ATM capacity. Under the June 11, 2019 ATM, the Company sold an aggregate of 4,141,569 shares of Common Stock at an average price of $4.83 per share, raising gross proceeds of approximately $20 million.
On March 6, 2020, the Company entered into a new Distribution Agreement with Raymond James & Associates, Inc. (“Agent”), pursuant to which the Company may sell from time to time, through the Agent, shares of Common Stock, having an aggregate offering price of up to $50,000,000 (the “March 6, 2020 ATM”). Sales under the March 6, 2020 ATM will be made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and the Agent. During the quarter ended June 30, 2020, the Company sold an aggregate of 1,162,527 shares of Common Stock pursuant to the March 6, 2020 ATM at an average price of $6.57 per share, raising gross proceeds of approximately $7.64 million. Since its inception on March 6, 2020 through the quarter ended June 30, 2020, the Company sold an aggregate of 1,499,014 shares of Common Stock at an average price of $6.27 per share, raising gross proceeds of approximately $9.40 million. From July 1, 2020 through July 31, 2020, the Company sold an aggregate of 945,082 additional shares of Common Stock pursuant to the March 6, 2020 ATM, at an average price of $14.48 per share, raising additional gross proceeds of approximately $13.69 million.
The Company has no obligation under the March 6, 2020 ATM to sell any shares and may at any time suspend sales or terminate the March 6, 2020 ATM in accordance with its terms. Agent is entitled under each ATM to a fixed commission of 3.0% of the aggregate gross proceeds from the any shares sold. Shares sold under the ATMs are issued pursuant to the Company’s existing Shelf Registration Statement, and the Prospectus Supplement to the Registration Statements filed June 11, 2019 and March 6, 2020, respectively.
Registered Direct Offering:
On March 6, 2020, the Company entered into and closed a $10.0 million registered direct offering of 1,250,000 shares of Common Stock at a per share purchase price equal to $8.00. Purchaser also received a three-year warrant to purchase up to 250,000 shares of Common Stock at any exercise and reissuanceprice of warrants in August 2019. $15.00 per share.
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Company Cash Needs
Our material cash needs for the next 24 months, assuming we do not expand our clinical trials beyond the current Phase 3 ALS and Phase 2 PMS trials in the United States, and the Phase 2 AD trials in Europe will include (i) costs of the clinical trialstrial in the U.S., and Europe, (ii) employee salaries, (iii) payments for rent and operation of the GMP facilities, and (iv) fees to our consultants and legal advisors, patents, and fees for facilities to be used in our research and development.
Management expects that the Company will continue to generate losses from the clinical development and regulatory activities, which will result in a negative cash flow from operating activity. The Company currently has sufficient cash to complete its ongoing ALS, Progressive MS and Alzheimer’s Disease clinical trials. Over the longer term, if we arethe Company is granted a BLA approval, additional capital raise will be needed in connection with strategic partnerships and to commercialize Nurown® for ALS, and to conduct additional trials for other indications. If the Company is not be able to raise additional capital wefor these purposes, management may need to slow the pace of commercialization or the Company may not be able to continue to function as a going concern and may have to cease operations or the Company will reduce its costs, including curtailing its current plan to move new indications into clinical testing. We will be required to raise a substantial amount of capital in the future in order to reach profitability and to complete the commercialization of our products.concern. Our ability to fund these future capital requirements will depend on many factors, including the following:
We have an effective shelf registration statementThe full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, financial condition, liquidity and capital resources will depend on file withfuture developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may emerge concerning COVID-19, the SEC (the “Registration Statement”)actions taken to offer and sell various securities from time to time. Under the Registration Statement, we have established an at-the-market common stock offering program (the “ATM Program”) to sell shares of common stock having an aggregate offering price of up to $20.0 million. During the quarter ended September 30, 2019, no sales were made under the ATM Program. This program provides additional financial flexibility and an alternative mechanism to access the capital markets at an efficient cost as and when we need financing. While we have not sold shares under the program to date, we currently intend to utilize the program when we believe the price we can obtain for our Common Stock is attractive.
On August 2, 2019, the Company entered into a Warrant Exercise Agreement which generated gross cash proceeds to the Company of approximately $3.3 million. Pursuant to the agreement, certain holders (the “Holders”) of warrants issued by the Company on June 6, 2018 (the “2018 Warrants”) agreed to exercise 842,000 shares of Common Stock of their 2018 Warrants, at an amended exercise price of $3.90 per share,contain it or treat its impact and the Company agreed to issue new warrants toeconomic impact on local, regional, national and international markets. Our management team is actively monitoring this situation and the Holders to purchase 842,000 shares of Common Stock, at an exercise price of $7.00, with an expiration date of December 31, 2021,possible effects on our financial condition and to amend the 2018 Warrants held by the Holders, to the extent not exercised, to reduce the exercise price to $7.00 per share and to extend the expiration date to December 31, 2021. For the 90 days following the date of the Warrant Exercise Agreement, neither the Company nor any Subsidiary will issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock, without the prior written consent of the Holders of a majority of the New Warrant shares. The Company also agreed to file a registration statement covering the resale of the additional shares of Common Stock underlying the New Warrants.
liquidity.
Critical Accounting Policies and Estimates
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 under different assumptions or conditions.
There were no significant changes to our critical accounting policies during the quarter ended SeptemberJune 30, 2019.2020. 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, 2018.2019.
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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, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This information has been omitted as the Company qualifies as a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended SeptemberJune 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we may become involved in litigation relating to claims arising out of operations in the normal course of business, which we consider routine and incidental to our business. We currently are not a party to any material legal proceedings, the adverse outcome of which, in management’s opinion, would have a material adverse effect on our business, results of operation or financial condition.
ThereOther than the additional risk factor below, there have not been any material changes from the risk factors previously disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 2019
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019 and in this Quarterly Report on Form 10-Q, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
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Risks Related to Our Business Operations and Commercialization of Stem Cell Therapies:
The coronavirus outbreak has the potential to cause disruptions in our business, including our clinical development activities.
The Outbreak of the novel strain of coronavirus, SARS-CoV-2 (COVID-19) disease, has currently impacted and may continue to adversely impact our business, including our preclinical studies and clinical trials. In December 2019, a novel strain of coronavirus, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States and Israel, where the Company conducts its operations, as well as its clinical trials of NurOwn®. In response to the spread of COVID-19, to ensure the safety of our employees and continuity of business operations, we have closed our offices, with our administrative employees continuing their work remotely, restricted on-site staff, and limited the number of staff in any given research and development laboratory. Our research and development laboratories in Israel and U.S. remain open.
As of the date of this report, our U.S. Phase 2 PMS clinical trial has continued with slight delays in the pace of enrollment due to site access restrictions related to the global COVID-19 pandemic. Scheduled March and April 2020 new patient enrollments were deferred to May 2020 due to site closures related to COVID-19. As of June 2020, all the trial sites were back on track to continue with the trial. As of August 4, 2020, all 20 study participants have been enrolled in the study. The Company is currently collecting the clinical and biomarker data from treated patients. Dosing of all participants is expected to be completed in the fourth quarter of 2020.
The Phase 3 ALS clinical trial continued to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19. As of July 2, 2020, the study completed dosing of all the participants in the Phase 3 ALS trial. Top-line efficacy data is expected by the end of November this year.
The Company recently announced a new clinical program focused on the development of NurOwn® as a treatment for AD. As part of the newly announced program, the Company is planning a multi-national Phase 2 clinical trial in Europe to evaluate the safety and efficacy of NurOwn® treatment in patients with prodromal to mild AD.
Because of the COVID-19 outbreak, we may in the future experience disruptions that could severely impact our business, including clinical trial activities; participant enrollment; or any currently unforeseen delays in completion of study timelines. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.
In addition, the trading prices for our common stock and other biotechnology companies have been highly volatile as a result of the COVID-19 epidemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.
The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs, business closures or business disruptions and the effectiveness of actions taken to contain and treat the disease.
During the quarter ended SeptemberJune 30, 2019,2020, we made no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors, as described in our most recent proxy statement.
Recent Sales of Unregistered Securities
Exercises of 2018 Amended Warrants: On June 6, 2018 the Company entered into Warrant Exercise Agreements with certain holders (“2018 Warrant Holders”), pursuant to which holders were issued warrants to purchase an aggregate 2,458,201 unregistered shares of Common Stock, at an exercise price of $9 per share, with an expiration date of December 31, 2020 (the “2018 Warrants”). In connection
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with the issuance of the 2019 Warrants (described below), certain 2018 Warrants were amended on August 2, 2019 to reduce the exercise price to $7.00 per share and to extend the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).
Between July 20, 2020 and July 24, 2020, 2018 Warrant Holders exercised an aggregate of 280,000 shares of the Amended 2018 Warrants (the “2018 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $1.96 million.
The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The 2018 Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The issuance of the 2018 Exercised Shares and 2018 Warrants was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from exercises for general corporate and working capital purposes.
Exercises of 2019 Warrants: On August 2, 2019, the Company entered into Warrant Exercise Agreements with certain 2018 Warrant Holders (“2019 Warrant Holders”), pursuant to which holders were issued warrants to purchase an aggregate 842,000 shares of Common Stock (the “2019 Warrants”), at an exercise price of $7.00, with an expiration date of December 31, 2021 (the “2019 Warrants”).
Between July 15, 2020 and July 24, 2020, 2019 Warrant Holders exercised an aggregate of 620,000 shares of the 2019 Warrants (the “2019 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $ 4.34 million.
The 2019 Warrants have not been registered under the Securities Act, or state securities laws. The 2019 Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349). The issuance of the 2019 Exercised Shares and 2019 Warrants is exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from exercises for general corporate and working capital purposes.
With the recent warrant exercises in July 2020, the Company has reduced its outstanding warrants shares to non-affiliates by approximately 37% and reduced its overall warrants shares outstanding by approximately 19%. In total, 900,000 of the 4,724,868 Company warrant shares outstanding were exercised between July 15 and July 24, 2020. 2,266,667 of the remaining 3,824,868 outstanding warrants shares are owned by affiliates of the Company.
Recent Sales Under ATM Distribution Agreement
From July 1, 2020 through July 31, 2020, the Company sold an aggregate of 945,082 additional shares of Common Stock pursuant to the March 6, 2020 ATM, at an average price of $14.48 per share, raising additional gross proceeds of approximately $13.69 million.
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The following documents are filed as exhibits to this report:
Exhibit Number | Description | Filed (or Furnished) with this Form 10-Q | Incorporated by Reference Herein | ||
Form | Exhibit & File No. | Date Filed | |||
| |||||
10.1 | * | | | | |
10.2 | * | | | | |
31.1 | * | ||||
31.2 | * | ||||
32.1 | ‡ | ||||
32.2 | ‡ | ||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | * | |||
101.SCH | XBRL Taxonomy Extension Schema Document | * | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | * | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | * | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | * | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | * | |||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | * | | | |
*Filed herewith
‡Furnished herewith
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SIGNATURES
Pursuant to the requirements 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. | |||
Date: | By: | /s/ Preetam Shah | |
Name: Preetam Shah | |||
Title: EVP, Chief Financial Officer (Principal Financial Officer) | |||
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