Edgar Filing: BRAINSTORM CELL THERAPEUTICS INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

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

For the transition period from _____________ to ___________________

Commission File Number 000-54365

BRAINSTORM CELL THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

Delaware	20-8133057
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

605 Third Avenue, 34th Floor

New York, NY 10158

(Address of principal executive offices)

(646) 666-3188

(Registrant's telephone number, including area code)

Not Applicable

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

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

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

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

Large accelerated filer ¨	Accelerated filer ¨

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

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

As of May 7, 2012, the number of shares outstanding of the registrant’s common stock, $0.00005 par value per share, was 128,586,644.

TABLE OF CONTENTS

		Page Number
PART I

Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
Item 3. Quantitative and Qualitative Disclosures About Market Risk		41
Item 4. Controls and Procedures		42

PART II

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

PART I: FINANCIAL INFORMATION

SPECIAL NOTE

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

Item 1. Financial Statements.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

UNAUDITED

U.S. DOLLARS IN THOUSANDS

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

UNAUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

	Page

Consolidated Balance Sheets	6

Consolidated Statements of Operations	7

Statements of Changes in Stockholders' Equity (Deficiency)	8 – 16

Consolidated Statements of Cash Flows	17

Notes to Consolidated Financial Statements	18 - 36

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

	March 31,			December 31,
	2012			2011
	Unaudited			Audited
ASSETS

Current Assets:
Cash and cash equivalents		1,145			1,923
Account receivable		482			312
Prepaid expenses		148			69
Total current assets		1,775			2,304

Long-Term Investments:
Prepaid expenses		17			17
Severance payment fund		129			109
Total long-term investments		146			126

Property and Equipment, Net		328			314

Total assets		2,249			2,744

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
Trade payables		325			244

Accrued expenses		839			750
Other accounts payable		126			141
Total current liabilities		1,290			1,135

Accrued Severance Pay		142			121

Total liabilities		1,432			1,256

Commitments And Contingencies Stockholders' Equity:
Stock capital: (Note 8)		6			6
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at March 31, 2012 and December 31, 2011; Issued and outstanding: 126,737,158 and 126,444,309 shares at March 31, 2012 and December 31, 2011 respectively.
Additional paid-in-capital		45,761			45,560
Deficit accumulated during the development stage		(44,950	)		(44,078	)
Total stockholders' equity		817			1,488

Total liabilities and stockholders' equity		2,249			2,744

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands

(Except share data)

	Three months					Period from September 22, 2000 (inception date) through
	ended March 31					March 31,
	2012			2011		2012 (*)
	Unaudited					Unaudited

Operating costs and expenses:

Research and development, net		369			270		24,788
General and administrative		510			258		17,513

Total operating costs and expenses		879			528		42,301

Financial expenses (income), net		(11	)		177		2,536
Other income		-			-		(132	)

Operating loss		868			705		44,705

Taxes on income		4			-		81

Loss from continuing operations		872			705		44,786

Net loss from discontinued operations		-			-		164

Net loss		872			705		44,950

Basic and diluted net loss per share from continuing operations		0.01			0.01

Weighted average number of shares outstanding used in computing basic and diluted net loss per share		126,591,262			108,895,199

(*) Out of which, $163, relating to the period from inception to March 31 2004, is unaudited.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

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

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

Stock issued on September 22, 2000 for cash at $0.00188 per share		8,500,000			1		16		-		-			17
Stock issued on March 31, 2001 for cash at $0.0375 per share		1,600,000			* -		60		-		-			60
Contribution of capital		-			-		8		-		-			8
Net loss		-			-		-		-		(17	)		(17	)

Balance as of March 31, 2001 (unaudited)		10,100,000			1		84		-		(17	)		68

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

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

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

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

Balance as of March 31, 2004		10,238,000		$	1	$	131	$	-		$	(163	)	$	(31	)

Stock issued on June 24, 2004 for private placement at $0.01 per share, net of $25,000 issuance expenses		8,510,000			* -		60		-			-			60
Contribution capital		-			-		7		-			-			7
Stock issued in 2004 for private placement at $0.75 per unit		1,894,808			* -		1,418		-			-			1,418
Cancellation of shares granted to service providers		(1,800,000	)		* -				-			-			-
Deferred stock-based compensation related to options granted to employees		-			-		5,979		(5,979	)		-			-
Amortization of deferred stock-based compensation related to shares and options granted to employees		-			-		-		584			-			584
Compensation related to shares and options granted to service providers		2,025,000			* -		17,506		-			-			17,506
Net loss		-			-		-		-			(18,840	)		(18,840	)

Balance as of March 31, 2005		20,867,808		$	1	$	25,101	$	(5,395	)	$	(19,003	)	$	704

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

											Deficit accumulated			Total
					Additional			Deferred			during the			stockholders'
	Common stock				paid-in			Stock - based			development			equity
	Number		Amount		capital			compensation			stage			(deficiency)
Balance as of March 31, 2005		20,867,808	$	1	$	25,101		$	(5,395	)	$	(19,003	)	$	704
Stock issued on May 12, 2005 for private placement at $0.8 per share		186,875		* -		149			-			-			149
Stock issued on July 27, 2005 for private placement at $0.6 per share		165,000		* -		99			-			-			99
Stock issued on September 30, 2005 for private placement at $0.8 per share		312,500		* -		225			-			-			225
Stock issued on December 7, 2005 for private placement at $0.8 per share		187,500		* -		135			-			-			135
Forfeiture of options granted to employees		-		-		(3,363	)		3,363			-			-
Deferred stock-based compensation related to shares and options granted to directors and employees		200,000		* -		486			(486	)		-			-
Amortization of deferred stock-based compensation related to options and shares granted to employees and directors		-		-		51			1,123			-			1,174
Stock-based compensation related to options and shares granted to service providers		934,904		* -		662			-			-			662
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)		-		-		(7,906	)								(7,906	)
Beneficial conversion feature related to a convertible bridge loan		-		-		164			-			-			164
Net loss		-		-		-			-			(3,317	)		(3,317	)

Balance as of March 31, 2006		22,854,587	$	1	$	15,803		$	(1,395	)	$	(22,320	)	$	(7,911	)
Elimination of deferred stock compensation due to implementation of ASC 718-10 (formerly SFAS 123(R))		-		-		(1,395	)		1,395			-			-
Stock-based compensation related to shares and options granted to directors and employees		200,000		* -		1,168			-			-			1,168
Reclassification due to application of ASC 815-40-25 (formerly EITF 00-19)		-		-		7,191			-			-			7,191
Stock-based compensation related to options and shares granted to service providers		1,147,225		-		453			-			-			453
Warrants issued to convertible note holder		-		-		11			-			-			11
Warrants issued to loan holder		-		-		110			-			-			110
Beneficial conversion feature related to convertible bridge loans		-		-		1,086			-			-			1,086
Net loss		-		-		-			-			(3,924	)		(3,924	)
Balance as of December 31, 2006		24,201,812	$	1	$	24,427		$	-		$	(26,244	)	$	(1,816	)

* Represents an amount less than $1. The accompanying notes are an integral part of the consolidated financial statements

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

Balance as of December 31, 2006		24,201,812	$	1	$	24,427	$	-	$	(26,244	)	$	(1,816	)

Stock-based compensation related to options and shares granted to service providers		544,095				1,446		-		-			1,446
Warrants issued to convertible note holder		-		-		109		-		-			109
Stock-based compensation related to shares and options granted to directors and employees		200,000		* -		1,232		-		-			1,232
Beneficial conversion feature related to convertible loans		-		-		407		-		-			407
Conversion of convertible loans		725,881		* -		224		-		-			224
Exercise of warrants		3,832,621		* -		214		-		-			214
Stock issued for private placement at $0.1818 per unit, net of finder's fee		11,500,000		1		1,999		-		-			2,000
Net loss		-		-		-		-		(6,244	)		(6,244	)

Balance as of December 31, 2007		41,004,409	$	2	$	30,058	$	-	$	(32,488	)	$	(2,428	)

Stock-based compensation related to options and stock granted to service providers		90,000		-		33		-		-			33
Stock-based compensation related to stock and options granted to directors and employees		-		-		731		-		-			731
Conversion of convertible loans		3,644,610		* -		1,276		-		-			1,276
Exercise of warrants		1,860,000		* -		-		-		-			-
Exercise of options		17,399		* -		3		-		-			3
Stock issued for private placement at $0.1818 per unit, net of finder's fee		8,625,000		1		1,499		-		-			1,500
Subscription of shares for private placement at $0.1818 per unit		-		-		281		-		-			281
Net loss		-		-		-		-		(3,472	)		(3,472	)

Balance as of December 31, 2008		55,241,418	$	3	$	33,881	$	-	$	(35,960	)	$	(2,076	)

* Represents an amount less than $1. The accompanying notes are an integral part of the consolidated financial statements

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

Balance as of December 31, 2008		55,241,418	$	3		$	33,881	$	-	$	(35,960	)	$	(2,076	)

Stock-based compensation related to options and stock granted to service providers		5,284,284		(*	)		775		-		-			775
Stock-based compensation related to stock and options granted to directors and employees		-		-			409		-		-			409
Conversion of convertible loans		2,500,000		(*	)		200		-		-			200
Exercise of warrants		3,366,783		(*	)		-		-		-			-
Stock issued for amendment of private placement		9,916,667		1			-		-		-			1
Subscription of shares		-		-			729		-		-			729
Net loss		-		-			-		-	$	(1,781	)		(1,781	)

Balance as of December 31, 2009		76,309,152	$	4		$	35,994	$	-	$	(37,741	)	$	(1,743	)

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

Balance as of December 31, 2009		76,309,152	$	4	$	35,994	$	-	$	(37,741	)	$	(1,743	)
Stock-based compensation related to options and stock granted to service providers		443,333		* -		96		-		-			96
Stock-based compensation related to stock and options granted to directors and employees		466,667		* -		388		-		-			388
Stock issued for amendment of private placement		7,250,000		1		1,750		-		-			1,751
Conversion of convertible note		402,385		* -		135		-		-			135
Conversion of convertible loans		1,016,109		* -		189		-		-			189
Issuance of shares		2,475,000				400							400
Exercise of options		1,540,885		* -		77		-		-			77
Exercise of warrants		3,929,446		* -		11		-		-			11
Subscription of shares for private placement at $0.12 per unit				-		455		-		-			455
Conversion of trade payable to stock				-		201		-		-			201
Issuance of shares on account of previously subscribed shares (See also Note 8 B.1.f)		2,000,001		* -		-		-		-			-
Net loss										(2,419	)		(2,419	)

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

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

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

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

Stock-based compensation related to options and stock granted to service providers				-		(20	)		-		-			(20	)
Stock-based compensation related to stock and options granted to directors and employees				-		27			-		-			27
Stock issued for private placement		833,333		-		250			-		-			250
Conversion of convertible note		445,617		-		137			-		-			137
Exercise of options , net		94,764		-		55			-		-			55
Stock issued for private placement		13,327,600		1		3,356			-		-			3,357
Issuance of shares on account of previously subscribed shares (See also Note 8 B.1.f)		10,499,999		-		24			-		-			24
Net loss											(705	)		(705	)

Balance as of March 31, 2011		121,034,291	$	6	$	43,525		$	-	$	(40,865	)	$	2,666

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(Except share data)

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

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

Stock-based compensation related to options and stock granted to service providers		474,203		-		449		-		-			449
Stock-based compensation related to stock and options granted to directors and employees		2,025,040		-		1,135		-		-			1,135
Conversion of convertible note		755,594		-		140		-		-			140
Exercise of options		1,648,728		-		243		-		-			243
Exercise of warrants		1,046,834		-		272		-		-			272
Issuance of shares for private placement		14,160,933		1		3,601		-		-			3,602
Issuance of shares on account of previously subscribed shares (See Note 8 B.1.f)		10,499,999		-		24		-		-			24
Net loss		-		-		-		-		(3,918	)		(3,918	)

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

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

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

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

Stock-based compensation related to options and stock granted to service providers				-		4			-		-			4
Stock-based compensation related to stock and options granted to directors and employees				-		177			-		-			177
Exercise of options		167,849		-		20			-		-			20
Exercise of warrants		125,000		-		(*	)		-		-			(*	)
Net loss		-		-		-			-		(872	)		(872	)

Balance as of March 31, 2012		126,737,158	$	6	$	45,761		$	-	$	(44,950	)	$	817

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(except share data)

							Period from
							September 22, 2000
	Three months						(inception date)
	ended March 31						through March 31,
	2012			2011			2012 (*)
	Unaudited						Unaudited
Cash flows from operating activities:
Net loss		(872	)		(705	)		(44,950	)
Less - loss for the period from discontinued operations		-			-			164
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of deferred charges		38			38			1,039
Severance pay, net		1			(8	)		13
Accrued interest on loans		-			-			451
Amortization of discount on short-term loans		-			-			1,864
Change in fair value of options and warrants		-			-			(795	)
Expenses related to shares and options granted to service providers		4			(20	)		21,490
Stock-based compensation related to options granted to employees		177			27			6,998
Decrease (increase) in accounts receivable and prepaid expenses		(249	)		265			(630	)
Increase in trade payables and convertible note		81			94			798
Increase in other accounts payable and accrued expenses		74			254			1,471
Erosion of restricted cash		-			-			(6	)
Net cash used in continuing operating activities		(746	)		(55	)		(12,093	)
Net cash used in discontinued operating activities		-			-			(23	)
Total net cash used in operating activities		(746	)		(55	)		(12,116	)

Cash flows from investing activities:
Purchase of property and equipment		(52	)		(37	)		(1,185	)
Restricted cash		-			-			6
Investment in lease deposit		-			1			(17	)
Net cash used in continuing investing activities		(52	)		(36	)		(1,196	)
Net cash used in discontinued investing activities		-			-			(16	)
Total net cash used in investing activities		(52	)		(36	)		(1,212	)

Cash flows from financing activities:
Proceeds from issuance of Common stock, net		-			3,607			12,319
Proceeds from loans, notes and issuance of warrants, net		-			-			2,061
Proceeds from exercise of warrants and options		20			55			651
Repayment of short-term loans		-			-			(601	)
Net cash provided by continuing financing activities		20			3,662			14,430
Net cash provided by discontinued financing activities		-			-			43
Total net cash provided by financing activities		20			3,662			14,473
Increase (decrease) in cash and cash equivalents		(778	)		3,571			1,145
Cash and cash equivalents at the beginning of the period		1,923			93			-
Cash and cash equivalents at end of the period		1,145			3,664			1,145

Non-cash financing activities:
Conversion of convertible loan and convertible note to shares Conversion of a debt to a trade payable to Common Stock $ 84		-			137

Conversion of other accounts payable to Common Stock		-			24

(*) Out of the which, cash flows used in discontinued operating activities of $36, cash flows used in discontinued investing activities of $16 and cash flows provided in discontinued financing activities of $57, relating to the period from inception to March 31, 2004, is unaudited.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 1 -

GENERAL

Brainstorm Cell Therapeutics Inc. (formerly: Golden Hand Resources Inc.) (the "Company") was incorporated in the State of Washington on September 22, 2000.

On May 21, 2004, the former major stockholders of the Company entered into a purchase agreement with a group of private investors, who purchased from the former major stockholders 6,880,000 shares of the then issued and outstanding 10,238,000 shares of Common Stock.

On July 8, 2004, the Company entered into a licensing agreement with Ramot of Tel Aviv University Ltd. ("Ramot"), to acquire certain stem cell technology (see Note 4). Subsequent to this agreement, the Company decided to focus on the development of novel cell therapies for neurodegenerative diseases based on the acquired technology and research to be conducted and funded by the Company.

Following the licensing agreement dated July 8, 2004, the management of the Company decided to abandon all old activities related to the sale of the digital data recorder product. The discontinuation of this activity was accounted for under the provision of Statement of Financial Accounting Standard ASC 360-10 (formerly "SFAS" 144), "Accounting for the Impairment or Disposal of Long-Lived Assets".

On October 25, 2004, the Company formed a wholly-owned subsidiary in Israel, Brainstorm Cell Therapeutics Ltd. ("BCT").

On November 22, 2004, the Company changed its name from Golden Hand Resources Inc. to Brainstorm Cell Therapeutics Inc. to better reflect its new line of business in the development of novel cell therapies for neurodegenerative diseases. BCT, as defined below, owns all operational property and equipment.

On September 17, 2006, the Company changed the Company's fiscal year-end from March 31 to December 31.

In December 2006, the Company changed its state of incorporation from Washington to Delaware.

Since its inception, the Company has devoted substantially all of its efforts to research and development, recruiting management and technical staff, acquiring assets and raising capital. In addition, the Company has not generated revenues. Accordingly, the Company is considered to be in the development stage, as defined in Statement of Financial Accounting Standards No. 7, "Accounting and reporting by development Stage Enterprises" ASC 915-10 (formerly "SFAS No. 7").

In October 2010, the Israeli Ministry of Health (“MOH”) granted clearance for a Phase I/II clinical trial using the Company’s autologous NurOwn™ stem cell therapy in patients with amyotrophic lateral sclerosis (“ALS”), subject to some additional process specifications as well as completion of the sterility validation study for tests performed.

On February 23, 2011, the Company submitted to the MOH all the required documents. Following approval of the MOH, a Phase I/II clinical study for ALS patients using the Company’s autologous NurOwn™ stem cell therapy (the “Clinical Trial”) was initiated in June 2011.

In January 2012, the Company reported on an interim safety follow-up of the first 4 patients enrolled in its Clinical Trial indicating that no significant treatment-related adverse events were reported. The NurOwn™ treatment has thus so far proven to be safe, and has shown some initial indications of beneficial clinical effects.

In February 2011, the U.S. Food and Drug Administration (“FDA”) granted orphan drug designation to the Company’s NurOwn™ autologous adult stem cell product candidate for the treatment of ALS.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 1 -

GENERAL (Cont.)

GOING CONCERN

As reflected in the accompanying financial statements, the Company’s operations for the three months ended March 31, 2012, resulted in a net loss of $872. The Company’s balance sheet reflects an accumulated deficit of $44,950. These conditions, together with the fact that the Company is a development stage Company and has no revenues nor are revenues expected in the near future, raise substantial doubt about the Company's ability to continue to operate as a going concern. The Company’s ability to continue operating as a “going concern” is dependent on several factors, among them is its ability to raise sufficient additional working capital.

In 2009, the Company decided to focus only on the effort to commence clinical trials for ALS and such trials did commence in 2011.

In February 2011, the Company raised approximately $3.8 million from institutional and private investors. However, there can be no assurance that additional funds will be available on terms acceptable to the Company, or at all.

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 -

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2011 are applied consistently in these financial statements.

NOTE 3 -

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited interim financial statements have been prepared in a condensed format and include the consolidated financial operations of the Company and its wholly-owned subsidiary as of March 31, 2012 and for the three months then ended, in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2012, are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

NOTE 4 -

RESEARCH AND LICENSE AGREEMENT

The Company has a Research and License Agreement, as amended and restated, with Ramot. The Company obtained a waiver and release from Ramot pursuant to which Ramot agreed to an amended payment schedule regarding the Company's payment obligations under the Research and License Agreement and waived all claims against the Company resulting from the Company's previous defaults and non-payment under the Research and License Agreement. The waiver and release amended and restated the original payment schedule under the original agreement providing for payments during the initial research period and additional payments for any extended research period.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 4 -

RESEARCH AND LICENSE AGREEMENT (Cont.)

As of December 24, 2009, the Company had paid to Ramot $400 but did not make payments totaling $240 for the initial research period and payments totaling $380 for the extended research period.

On December 24, 2009, the Company and Ramot entered into a settlement agreement which amended the Research and License Agreement, as amended and restated pursuant to which, among other things, the following matters were agreed upon:

Ramot released the Company from its obligation to fund the extended research period in the total amount of $1,140. Therefore, the Company deleted an amount in 2009, equal to $760 from it research and development expenses that were previously expensed.

Past due amounts of $240 for the initial research period plus interest of $32 owed by the Company to Ramot was converted into 1,120,000 shares of common stock on December 30, 2009. Ramot was required to deposit the shares with a broker and only sell the shares in the open market after 185 days from the issuance date.

In the event that the total proceeds generated by sales of the shares on December 31, 2010, together with the March 31, 2010 payment, are less than $240 on or prior to December 31, 2010, then on such date the Company shall pay to Ramot the difference between the proceeds that Ramot has received from sales of the shares up to such date together with the September Payment (if any) that has been transferred to Ramot up to such date, and $240. Related compensation in the amount of $51 was recorded as research and development expenses.

In January 2011 Ramot exercised additional 167,530 Common Stock of the Company, for $35, which finalized the sale of the 1,120,000 Common Stock of the Company granted to Ramot for $235. In February 2011 the Company paid the remaining $5 and finalized the balance due to Ramot according to the settlement agreement between the parties dated December 24, 2009.

NOTE 5 -

CONSULTING AGREEMENTS

On July 8, 2004, the Company entered into two consulting agreements with Prof. Eldad Melamed and Dr. Daniel Offen (together, the "Consultants"), under which the Consultants provide the Company scientific and medical consulting services in consideration for a monthly payment of $6 each. In addition, the Company granted each of the Consultants, a fully vested warrant to purchase 1,097,215 shares of Common Stock at an exercise price of $0.01 per share. The warrants issued pursuant to the agreement were issued to the Consultants effective as of November 4, 2004. Each of the warrants is exercisable for a seven-year period beginning on November 4, 2005. As of September 2010, all the above warrants had been exercised.

On December 16, 2010, the Company approved a grant of 1,100,000 shares of the Company's Common Stock to the two Consultants, for services rendered through December 31, 2010. Related compensation in the amount of $220 was recorded as research and development expense. A sum of $487 was cancelled concurrently with the issuance of the 1,100,000 shares of Common Stock of the Company.

On June 27, 2011, the Company approved an additional grant of 400,000 shares of the Company's Common Stock to Prof. Daniel Offen, for services rendered through December 31, 2009. Related compensation in the amount of $192 is recorded as research and development expense.

As of March 31, 2012, the Company has a total obligation of $135 for services rendered by the Consultants under the abovementioned agreements.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 6 -

SHORT-TERM CONVERTIBLE NOTE

On December 13, 2009, the Company issued a $135 Convertible Promissory Note to its legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the Note accrued at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

The gap between the amount the Company owed to the legal advisor and the principal of the Convertible Promissory Note in the amount of $82 was deducted from general and administrative expenses.

On February 19, 2010, the Company's legal advisor converted the entire accrued principal and interest of $135 Convertible Promissory Note into 402,385 shares of Common Stock.

On September 15, 2010, the Company issued a $135 Convertible Promissory Note to its legal advisor for legal fees accrued through December 31, 2010. Interest on the Note was at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion election.

On February 18, 2011, the legal advisor converted the entire accrued principal and interest into 445,617 shares of Common Stock.

NOTE 7 -

SHORT-TERM LOANS

In March 2007, the Company issued a $150 convertible note to a lender, with an annual interest rate of 8% for the first year, with an increase up to 10% after the first year. On January 27, 2010, the lender converted the entire accrued principal and interest of $189 into 1,016,109 shares of Common Stock of the Company. In July 2011, the Company issued to the lender an additional 309,977 shares of Common Stock of the Company with regard to the above conversion.

Since the outcome of the issuance of the shares was to relieve the debtor from its obligation, based on guidance in ASC 860-10 (formerly FASB No 140) and ASC 450-20 Extinguishment of Liabilities” the Company derecognized the liability with the difference recognized in earnings.

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 general meetings of the Company, the right to a share in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.

The Common Stock is registered and publicly traded on the Over-the-Counter Bulletin Board service of the National Association of Securities Dealers, Inc. under the symbol BCLI.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares warrants and options:

Private placements:

On June 24, 2004, the Company issued to investors 8,510,000 shares of Common Stock for total proceeds of $60 (net of $25 issuance expenses).

On February 23, 2005, the Company completed a private placement for sale of 1,894,808 units for total proceeds of $1,418. Each unit consists of one share of Common Stock and a three-year warrant to purchase one share of Common Stock at $2.50 per share. This private placement was consummated in three tranches which closed in October 2004, November 2004 and February 2005.

On May 12, 2005, the Company issued to an investor 186,875 shares of Common Stock at a price of $0.8 per share for total proceeds of $149.

On July 27, 2005, the Company issued to investors 165,000 shares of Common Stock at a price of $0.6 per share for total proceeds of $99.

On August 11, 2005, the Company signed a private placement agreement with investors for the sale of up to 1,250,000 units at a price of $0.8 per unit. Each unit consists of one share of Common Stock and one warrant to purchase one share of Common Stock at $1.00 per share. The warrants are exercisable for a period of three years from issuance. On March 31, 2005, the Company sold 312,500 units for total net proceeds of $225. On December 7, 2005, the Company sold 187,500 units for total net proceeds of $135.

On July 2, 2007, the Company entered into an investment agreement, pursuant to which the Company agreed to sell up to 27,500,000 shares of Common Stock, for an aggregate subscription price of up to $5 million and warrants to purchase up to 30,250,000 shares of Common Stock. Separate closings of the purchase and sale of the shares and the warrants were originally scheduled to take place as follows:

Purchase date	Purchase price		Number of subscription shares		Number of warrant shares

August 30, 2007	$	1,250 (includes $250 paid as a convertible loan)		6,875,000		7,562,500
November 15, 2007	$	750		4,125,000		4,537,500
February 15, 2008	$	750		4,125,000		4,537,500
May 15, 2008	$	750		4,125,000		4,537,500
July 30, 2008	$	750		4,125,000		4,537,500
November 15, 2008	$	750		4,125,000		4,537,500

On August 18, 2009, the Company entered into an amendment to the investment agreement with the investor providing for the following:

(a)

The investor shall invest the remaining amount of the original investment agreement at price per share of $0.12 in monthly installments of not less than $50 starting August 1, 2009. The investor may accelerate such payments at his discretion.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares warrants and options: (Cont.)

Private placements: (Cont.)

(b)

The exercise price of the last 10,083,334 warrants decreased from an exercise price of $0.36 per share to $0.29 per share.

(c)

All warrants expire on November 5, 2013 instead of November 5, 2011.

(d)

The price per share of the investment agreement decreased from $0.1818 to $0.12, therefore the Company adjusted the number of Shares of Common Stock issuable pursuant the investment agreement retroactively and issued to the investor on October 28, 2009 an additional 9,916,667 shares of Common Stock for past investment.

(e)

The investor has the right to cease payments in the event that the price per share as of the closing on five consecutive trading days shall decrease to $0.05.

On January 18, 2011 the Company and an investor signed an agreement to balance amounts due to the investor, totaling $20, against the remaining balance of the investment. The Company issued to the investor 10,499,999 shares of Common Stock and a warrant to purchase 4,539,500 shares of the Company's Common Stock at an exercise price of $0.20 per share

As of March 31, 2011, the Company issued to the investor and its designees an aggregate of 41,666,667 shares of common stock and a warrant to purchase 10,083,333 shares of the Company's common stock at an exercise price of $0.20 per share and a warrant to purchase 20,166,667 shares of common stock at an exercise price of $0.29 per share. The warrants may be exercised at any time and expire on November 5, 2013.

In addition, the Company agreed to issue an aggregate of 1,250,000 shares of Common Stock to a related party as an introduction fee for the investment. The shares shall be issued pro rata to the funds received from the investor.

As of December 31, 2010, the introduction fee was paid in full.

In January 2010, the Company issued 1,250,000 units to a private investor for total proceeds of $250. Each unit consists of one share of Common Stock and a two-year warrant to purchase one share of Common Stock at $0.50 per share.

In February 2010, the Company issued 6,000,000 shares of Common Stock to 3 investors (2,000,000 to each investor) and warrants to purchase an aggregate of 3,000,000 shares of Common Stock (1,000,000 to each investor) with an exercise price of $0.5 for aggregate proceeds of $1,500 ($500 each).

On February 7, 2011, the Company issued 833,333 shares of Common Stock, at a price of $0.3 per share, and a warrant to purchase 641,026 shares of the Company's Common Stock at an exercise price of $0.39 per share for one year for total proceeds of $250.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares warrants and options: (Cont.)

Private placements: (Cont.)

On February 23, 2011, the Company entered into an investment agreement, pursuant to which the Company agreed to sell up to 12,815,000 shares of Common Stock, for an aggregate subscription price of up to $3.6 million and warrants to purchase up to 19,222,500 shares of Common Stock as follows: warrant to purchase 12,815,000 shares of Common Stock at $0.5 for two years, and warrants to purchase 6,407,500 shares of Common Stock at $0.28 for one year.

In addition, the Company agreed to pay 10% of the funds received for the distribution services received, out of this amount, 4% was be paid in stock and the remaining 6% in cash. Accordingly, in March 2011, the company issued 512,600 Common Stock and paid $231.

Share-based compensation to employees and to directors:

Options to employees and directors:

On November 25, 2004, the Company's stockholders approved the 2004 Global Stock Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) and on March 28, 2005, the Company's stockholders approved the 2005 U.S. Stock Option and Incentive Plan, and the reservation of 9,143,462 shares of Common Stock for issuance in the aggregate under these stock option plans.

Each option granted under the plans is exercisable until the earlier of ten years from the date of grant of the option or the expiration dates of the respective option plans. The 2004 and 2005 options plans will expire on November 25, 2014 and March 28, 2015, respectively. The exercise price of the options granted under the plans may not be less than the nominal value of the shares into which such options are exercised. The options vest primarily over three or four years. Any options that are canceled or forfeited before expiration become available for future grants.

On June 5, 2008, the Company's stockholders approved an amendment and restatement of the Company’s 2004 Global Share Option Plan and 2005 U.S. Stock Option and Incentive Plan to increase the number of shares of common stock available for issuance under these stock option plans in the aggregate by 5,000,000 shares.

In June 2011, the Company's stockholders approved an increase the number of shares of common stock available for issuance under these stock option plans in the aggregate by 5,000,000 shares.

As of March 31, 2012, 1,825,103 options are available for future grants.

On May 27, 2005, the Company granted one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.75 per share. The option is fully vested and expires after 10 years.

On February 6, 2006, the Company entered into an amendment to the Company's option agreement with the Company's former Chief Financial Officer. The amendment changed the exercise price of the 400,000 options granted to him on February 13, 2005 from $0.75 to $0.15 per share.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Share-based compensation to employees and to directors: (Cont.)

Options to employees and directors: (Cont.)

On May 2, 2006, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and expires after 10 years. The compensation related to the option, in the amount of $48, was recorded as general and administrative expense.

On June 22, 2006, the Company entered into an amendment to the Company's option agreement with two of its employees. The amendment changed the exercise price of 270,000 options granted to them from $0.75 to $0.15 per share. The excess of the fair value resulting from the modification, in the amount of $2, was recorded as general and administration expense over the remaining vesting period of the options.

On September 17, 2006, the Company entered into an amendment to the Company's option agreement with one of its directors. The amendment changed the exercise price of 100,000 options granted to the director from $0.75 to $0.15 per share.

On March 21, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $43, was recorded as general and administrative expense.

On July 1, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $38, was recorded as general and administrative expense. On October 22, 2007, the Company and the director agreed to cancel and relinquish all the options which were granted on July 1, 2007.

On July 16, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $75, was recorded as general and administrative expense.

On August 27, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $84, was recorded as general and administrative expense.

On October 23, 2007, the Company granted to its Chief Executive Officer an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.87 per share. The option is fully vested and expires after 10 years. The total compensation related to the option is $733, which is amortized over the vesting period as general and administrative expense.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Share-based compensation to employees and to directors: (Cont.)

Options to employees and directors: (Cont.)

On November 5, 2008, the Company entered into an amendment to the Company's option agreement with the Company's Chief Executive Officer. The amendment changed the exercise price of the 1,000,000 options from $0.87 to $0.15 per share. The compensation related the modification of the purchase price in the amount of $4 was recorded as general and administrative expense.

On June 29, 2009, the Company granted to its former Chief Executive Officer and director an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.067 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $68, which is amortized over the vesting period as general and administrative expense. In February 2011, the former CEO resigned. On July 25, 2011 the Company signed a settlement agreement with the former CEO under which 483,333 shares out of the above grant became fully vested exercisable through April 30 2012. An additional $30 was written as compensation in general and administrative expense.

After the balance sheet date, the former CEO exercised the option to 483,333 shares of Common Stock for an exercise price of $32.

On June 29, 2009, the Company granted to its former Chief Financial Officer an option to purchase 200,000 shares of Common Stock at an exercise price of $0.067 per share. The option vested with respect to 1/3 of the shares subject to the option. In connection with the former Chief Financial Officer’s resignation, 2/3 of the above shares were cancelled and the remaining 66,667 are valid through April 7, 2011.

On August 31, 2009, the Company granted to two of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. Each option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $32, which is amortized over the vesting period as general and administrative expense.

On December 13, 2009, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to the option, in the amount of $21, was recorded as general and administrative expense.

On February 10, 2010, the Company granted to an employee an option to purchase 30,000 shares of Common Stock at an exercise price of $0.32 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $9, which is amortized over the vesting period as research and development expense.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Share-based compensation to employees and to directors: (Cont.)

Options to employees and directors: (Cont.)

On April 13, 2010, the Company, Abraham Israeli and Hadasit Medical Research Services and Development Ltd. (“Hadasit”) entered into an Agreement (the “Agreement”) pursuant to which Mr. Israeli agreed, during the term of the Agreement, to serve as (i) the Company’s Clinical Trials Advisor and (ii) a member of the Company’s Board of Directors. In consideration of the services to be provided by Mr. Israeli to the Company under the Agreement, the Company agreed to grant options annually during the term of the Agreement for the purchase of its Common Stock, as follows:

An option for the purchase of 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share to Mr. Israeli; and

An option for the purchase of 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share to Hadasit,

* Such options will vest and become exercisable in twelve (12) consecutive equal monthly amounts.

In April 2010, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option was $50, which is amortized over the vesting period as general and administrative expense.

On January 30, 2011 the Company signed an agreement with a new COO and acting CEO. According to the employment agreement, the new COO received 450,000 options to purchase Common Stock of the Company at $0.20.

On June 27 2011, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. The total compensation related to the option was $48, which is amortized over the vesting period as general and administrative expense.

On June 27 2011, the Company granted to four of its directors an option to purchase 634,999 shares of Common Stock of the Company at $0.15. The total compensation related to the option was $287, which is amortized over the vesting period as general and administrative expense.

On August 10 2011, the Company granted to its CEO, an option to purchase 70,000 shares of Common Stock of the Company at $0.20. The total compensation related to the option was $26, which was amortized as general and administrative expense.

In the three months ended March 31 2012, 167,849 options were exercised by former CEO of the Company for $20.

After the balance sheet date, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Share-based compensation to employees and to directors: (Cont.)

Restricted shares to directors (Cont.):

A summary of the Company's option activity related to options to employees and directors, and related information is as follows:

	For the period ended March 31, 2012
	Amount of options		Weighted average exercise price		Aggregate intrinsic value
				$		$

Outstanding at beginning of period		4,938,821		0.168
Granted		-
Exercised		167,849		0.150
Reclassified		13,784		0.067

Outstanding at end of period		4,784,756		0.169		807,430

Vested and expected-to-vest at end of period		3,784,617		0.166		627,162

On May 2, 2006, the Company issued to two of its directors 200,000 restricted shares of common stock (100,000 each). The restrictions on the shares have fully lapsed. The compensation related to the stocks issued amounted to $104, which was amortized over the vesting period as general and administrative expenses.

On April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to a director 100,000 restricted shares of Common Stock. The restrictions on the shares have fully lapsed. The compensation related to the shares issued amounted to $47, which was amortized over the vesting period as general and administrative expenses.

In addition, on April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to another director 100,000 restricted shares of Common Stock. The restricted shares are not subject to any right to repurchase, and the compensation related to the shares issued amounted to $47 was recorded as prepaid general and administrative expenses in the three months ended March 31, 2007.

On August 27, 2008, the Company issued to one of its directors 960,000 shares of Common Stock upon a cashless exercise by a shareholder of a warrant to purchase 1,000,000 shares of Common Stock at an exercise price of $.01 per share that was acquired by the shareholder from Ramot. The shares were allocated to the director by the shareholder.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Share-based compensation to employees and to directors: (Cont.)

Restricted shares to directors (Cont.):

In May 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its directors 300,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

In May and in June 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its Scientific Advisory Board members and two of its Advisory Board members 500,000 restricted shares of common stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

On April 6, 2010, Prof. Melamed fully exercised his warrant to purchase 1,097,215 shares of the Company’s Common Stock; the warrant was issued to him pursuant to the agreement with the Consultants effective as of November 4, 2004.

Shares and warrants to investors and service providers:

The Company accounts for shares and warrants issued to non-employees using the guidance of ASC 718-10 (formerly "SFAS" 123(R)), "Accounting for Stock-Based Compensation" and ASC 505-50-30 (formerly "EITF" 96-18), "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services," whereby the fair value of such option and warrant grants is determined using a Black-Scholes options pricing model at the earlier of the date at which the non-employee's performance is completed or a performance commitment is reached.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Shares and warrants to investors and service providers: (Cont.)

Warrants to investors and service providers and investors:

Issuance date	Number of warrants issued		Exercised		Forfeited		Outstanding		Exercise Price $		Warrants exercisable		Exercisable through

November 2004		12,800,845		11,761,281		151,803		887,761		0.01		887,761		April 2012
December 2004		1,800,000		1,800,000				-		0.00005		–		-
February 2005		1,894,808				1,894,808		-		2.5		-		-
May 2005		47,500				47,500		-		1.62		-		-
June 2005		30,000						30,000		0.75		30,000		June 2015
August 2005		70,000				70,000		-		0.15		-		-
September 2005		3,000		3,000				-		0.15		-		-
September 2005		36,000				36,000		-		0.75		-		-
September-December 2005		500,000				500,000		-		1		-		-
December 2005		20,000		20,000				-		0.15		-		-
December 2005		457,163		150,000				307,163		0.15		307,163		December 2015
February 2006		230,000						230,000		0.65		230,000		February 2016
February 2006		40,000				40,000		-		1.5		-
February 2006		8,000				8,000		-		0.15		-
February 2006		189,000		97,696		91,304		-		0. 5		-		-
May 2006		50,000						50,000		0.0005		50,000		May 2016
May -December 2006		48,000				48,000		-		0.35		-		-
May -December 2006		48,000				48,000		-		0.75		-		-
May 2006		200,000						200,000		1		200,000		May 2011
June 2006		24,000				24,000		-		0.15		-		-
May 2006		19,355				19,355		-		0.15		-		-
October 2006		630,000		630,000				-		0.3		-		-
December 2006		200,000				200,000		-		0.45		-		-
March 2007		200,000				200,000		-		0.47		-		-
March 2007		500,000						500,000		0.47		500,000		March 2017
March 2007		50,000				50,000		-		0.15		-		-
March 2007		15,000				15,000		-		0.15		-		-
February 2007		50,000				50,000		-		0.45		-		-
March 2007		225,000				225,000		-		0.45		-		-
March 2007		50,000				50,000		-		0.45		-		-
April 2007		33,300				33,300		-		0.45		-		-
May 2007		250,000				250,000		-		0.45		-		-
July 2007		500,000						500,000		0.39		500,000		July 2017
September 2007		500,000						500,000		0.15		500,000		August 2017
August 2007		7,562,500						7,562,500		0.2		7,562,500		November 2013
July 2007		30,000				30,000		-		0.45		-		-
July 2007		100,000				100,000		-		0.45		-		-
October 2007		200,000						200,000		0.15		200,000		August-October 2017
November 2007		2,520,833						2,520,833		0.20		2,520,833		November 2013
November 2007		2,016,667						2,016,667		0.29		2,016,667		November 2013
April 2008		4,537,500						4,537,500		0.29		4,537,500		November 2013
August 2008		3,529,166						3,529,166		0.29		3,529,166		November 2013
August 2008		1,008,334						1,008,334		0.29		1,008,333		November 2013
November 2008		100,000						100,000		0.15		100,000		September 2018
April 2009		200,000						200,000		0.1		200,000		April 2019
October 2009		200,000		100,000				100,000		0.067		66,667		October 2019
October 2009		4,537,500						4,537,500		0.29		4,537,500		November 2013
January 2010		1,250,000				1,250,000		-		0.5		-		-
February 2010		125,000		125,000				-		0.01		-		-
February 2010		3,000,000				3,000,000		-		0.5		-		-
January 2011		4,537,500						4,537,500		0.29		4,537,500		November 2013
February 2011		641,026				641,026		-		0.39		-		-
February 2011		6,407,500		946,834		5,460,666		-		0.28		-		-
February 2011		12,815,000						12,815,000		0.5		12,815,000		February 2013
April 2010		33,334						33,334		0.00005		33,334		April 2020
April 2011		33,334						33,334				33,334		April 2021
February 2010		1,500,000						1,500,000				500,000		February 2020
		78,604,165		15,633,811		14,533,762		48,436,590				47,403,257

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Shares and warrants to service providers: (Cont.)

Warrants: (Cont.)

The fair value for the warrants to service providers was estimated on the date of grant using a Black-Scholes option pricing model, with the following weighted-average assumptions for the 3 month activity ended on March 31, 2011; weighted average volatility of 134%-141%, risk free interest rates of 2.26%-3.47% dividend yields of 0% and a weighted average life of the options of 6-10 years.

On June 1 and June 4, 2004, the Company issued 40,000 and 150,000 shares of Common Stock for 12 months of filing services and legal and due-diligence services, respectively, with respect to a private placement. Compensation expense related to filing services, totaling $26, was amortized over a 12-month period. Compensation related to legal services, totaling $105 was recorded as equity issuance cost and had no effect on the statement of operations.

On July 1 and September 22, 2004, the Company issued 20,000 and 15,000 shares to a former director for financial services for the first and second quarters of 2004, respectively. Related compensation in the amount of $39 was recorded as general and administrative expense.

On February 10, 2005, the Company signed an agreement with one of its service providers under which the Company issued the service provider 100,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed.

In March and April 2005, the Company signed an agreement with four members of its Scientific Advisory Board under which the Company issued to the members of the Scientific Advisory Board 400,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan (100,000 each). All restrictions on these shares have lapsed.

In July 2005, the Company issued to its legal advisors 50,000 shares for legal services for 12 months. The compensation related to the shares in the amount of $37.5 was recorded as general and administrative expense.

In January 2006, the Company issued to two service providers 350,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed. Related compensation in the amount of $23 was recorded as general and administrative expense.

On March 6, 2006, the Company issued to its legal advisor 34,904 shares of Common Stock. The shares are in lieu of $18.5 payable to the legal advisor. Related compensation in the amount of $18.5 was recorded as general and administrative expense.

On April 13, 2006, the Company issued to service providers 60,000 shares of Common Stock at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of the Company. Related compensation in the amount of $25.8 was recorded as general and administrative expense.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

On May 9, 2006, the Company issued to its legal advisor 65,374 shares of Common Stock in lieu of payment for legal services. Related compensation in the amount of $33 was recorded as general and administrative expense.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Shares and warrants to service providers: (Cont.)

Shares: (Cont.)

On June 7, 2006, the Company issued to a service provider 50,000 shares of Common Stock for filing services for 12 months. Related compensation in the amount of $24.5 was recorded as general and administrative expense.

On May 5, 2006, the Company issued 200,000 shares of Common Stock to a finance consultant for his services. Related compensation in the amount of $102 was recorded as general and administrative expense.

On August 14, 2006, the Company issued 200,000 shares of Common Stock to a service provider. Related compensation in the amount of $68 was recorded as general and administrative expense.

On August 17, 2006, the Company issued 100,000 shares of Common Stock to a service provider. Related compensation in the amount of $35 was recorded as general and administrative expense.

On September 17, 2006, the Company issued to its legal advisor 231,851 shares of Common Stock in lieu of $63 payable to the legal advisor. [Related compensation in the amount of $63 was recorded as general and administrative expense.]

On April 1 and September 30, 2006, the Company issued to its business development advisor, based on an agreement, 240,000 shares of Common Stock. Related compensation in the amount of $74 was recorded as general and administrative expense.

On January 3, 2007, the Company issued to its legal advisor 176,327 shares of Common Stock in lieu of $45 payable to the legal advisor. Related compensation in the amount of $49 was recorded as general and administrative expense.

On April 12, 2007, the Company issued to its filing and printing service providers 80,000 shares of Common Stock in lieu of $15 payable to the service provider. Related compensation in the amount of $30 was recorded as general and administrative expense. In addition, the Company was obligated to issue the filing and printing service providers additional shares, in the event that the total value of the shares previously issued (as quoted on the Over-the-Counter Bulletin Board or such other exchange where the Common Stock is quoted or listed) was less than $0.20 on March 20, 2008. As a result, the Company recorded a liability in the amount of $20.

On April 12, 2007, the Company issued to its legal advisor 108,511 shares of Common Stock in lieu of $29 payable to the legal advisor. Related compensation in the amount of $40 was recorded as general and administrative expense.

On May 18, 2007, the Company issued to its legal advisor 99,257 shares of Common Stock in lieu of $33 payable to the legal advisor. Related compensation in the amount of $33 was recorded as general and administrative expense.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Shares and warrants to service providers: (Cont.)

Shares: (Cont.)

On October 29, 2007, the Company issued to a scientific advisory board member 80,000 shares of the Company’s Common Stock for scientific services. Compensation of $67 was recorded as research and development expense.

On May 20, 2008, the Company issued to its financial advisor 90,000 shares of the Company's Common Stock. The shares were for $35 payable to the financial advisor for introduction fee of past convertible loans. Related compensation in the amount of $36 was recorded as financial expenses.

On April 5, 2009, the Company issued to its Chief Technology Advisor 1,800,000 shares of Common Stock. The shares were for $180 payable to the advisor. Related compensation in the amount of $144 was recorded as research and development expense.

On June 24, 2009, the Company issued to its public relations advisor 250,000 shares of Common Stock. The shares were for $25 payable to the advisor. Related compensation in the amount of $18 was recorded as general and administrative expense.

On July 8, 2009, the Company issued to its financial consultant 285,714 shares of the Company's Common Stock. The shares were for $20 payable to the financial consultant for valuation of options and warrants. Related compensation in the amount of $20 was recorded as general and administrative expense.

On July 15, 2009, the Company issued to a service provider 357,142 shares of the Company's Common Stock. The shares were for $25 payable to the service provider for filing services. Related compensation in the amount of $21 was recorded as general and administrative expense.

On August 10, 2009, the Company issued to a service provider 71,428 shares of the Company's Common Stock. The shares were for $5 payable to the service provider for IT services. Related compensation in the amount of $4 was recorded as general and administrative expense.

On January 5, 2010, the Company issued to its public relations advisor 50,000 shares of the Company's Common Stock for six months service. The issuance of the shares is part of the agreement with the public relations advisor that entitled them to a monthly grant of 8,333 shares of the Company's Common Stock. Related compensation in the amount of $12 was recorded as general and administrative expense.

On January 6, 2010, the Company issued to a service provider 60,000 shares of the Company's Common Stock. The shares were for $15 payable to the service provider for insurance and risk management consulting and agency services for three years. Related compensation in the amount of $16 was recorded as general and administrative expense.

On March 5, 2007, the Company issued a $150 Convertible Promissory Note to a third party. Interest on the note accrued at the rate of 8% per annum for the first year and 10% per annum after the first year. On January 27, 2010, the third party converted the entire accrued principle and interest outstanding under the note, amounting to $189, into 1,016,109 shares of Common Stock.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

Issuance of shares, warrants and options: (Cont.)

Shares and warrants to service providers: (Cont.)

Shares: (Cont.)

On December 13, 2009, the Company issued a $135 Convertible Promissory Note to it legal advisor for $217 in legal fees accrued through October 31, 2009. Interest on the note accrued at the rate of 4%. On February 19, 2010, the Company’s legal advisor converted the entire accrued principal and interest of outstanding under the note into 402,385 shares of Common Stock.

In May 2010, based on a board resolution dated June 29, 2009 the Company issued to one of its public relations advisors 100,000 restricted shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

On December 16, 2010, the Company issued to a service provider 83,333 shares of the Company's Common Stock. The shares were for public relations services. Related compensation in the amount of $40 is recorded as general and administrative expense.

On December 16, 2010, the Company granted to its Chief Medical Advisor 900,000 shares of the Company's Common Stock for services rendered through December 31 2010. Related compensation in the amount of $180 is recorded as research and development expense (see Note 5B).

On December 16, 2010 the Company granted to its Chief Scientist 200,000 shares of the Company's Common Stock for services rendered through December 31 2010. Related compensation in the amount of $40 is recorded as research and development expense (see Note 5B).

On February 16, 2011 one of the Company's consultants exercised 100,000 warrants to Common Stock for $33.

On February 18, 2011, the Company's legal advisor converted the entire accrued principal and interest of the Convertible Promissory Note granted on September 15, 2010, totaling $137, into 445,617 shares of Common Stock.

The total stock-based compensation expense, related to shares, options and warrants granted to employee’s directors and service providers, was comprised, at each period, as follows:

	Three months ended March 31				Period from September 22, 2000 (inception date) through March 31,
	2012		2011		2012
	Unaudited				Unaudited

Research and development		13		9		17,556
General and administrative		168		-2		10,281
Financial expenses, net		-		-		248
Total stock-based compensation expense		181		7		28,098

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

Notes to the financial statements

NOTE 9 -

SUBSEQUENT EVENTS

In April 2012, the former CEO exercised 1,014,757 options to shares of Common Stock of the Company. An exercise fee of $112 was paid to the Company. (See note 8 B 2 (a))

In April 2012, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005 per share. (See note 8 B 2 (a))

In April 2012, the Company granted to Hadasit a warrant to purchase 33,334 shares of Common Stock at an exercise price equal to $0.00005 per share. (See note 8 B 2 (a))

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 Brainstorm Cell Therapeutics Inc. and its potential future business operations and performance. These statements, descriptions, forecasts and projections constitute “forward-looking statements,” and as such involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance and achievements to be materially different from any results, levels of activity, performance and achievements expressed or implied by any such “forward-looking statements.” Some of these are described under “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2011. In some cases you can identify such “forward-looking statements” by the use of words like “may,” “will,” “should,” “could,” “expects,” “hopes,” “anticipates,” “believes,” “intends,” “plans,” “estimates,” “predicts,” “likely,” “potential,” or “continue” or the negative of any of these terms or similar words. These “forward-looking statements” are based on certain assumptions that we have made as of the date hereof. To the extent these assumptions are not valid, the associated “forward-looking statements” and projections will not be correct. Although we believe that the expectations reflected in these “forward-looking statements” are reasonable, we cannot guarantee any future results, levels of activity, performance or achievements. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change, we may not inform you if they do and we undertake no obligation to do so. We caution investors that our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business, prospective investors should carefully consider the information set forth under the caption “Risk Factors” in addition to the other information set forth herein and elsewhere in our other public filings with the Securities and Exchange Commission.

Company Overview

Brainstorm Cell Therapeutics Inc. (“Brainstorm” or the “Company”) is a biotechnology company developing innovative adults stem cell therapies for highly debilitating neurodegenerative disorders such as Amyotrophic Lateral Sclerosis (ALS, also known as Lou Gehrig's disease), Multiple Sclerosis, and Parkinson’s disease (PD). These devastating diseases have limited treatment options and as such represent highly unmet medical needs.

BrainStorm’s proprietary process for propagation of Mesenchymal Stem Cells (MSC), and their differentiation into NeuroTrophic factor-(NTF) secreting cells (MSC-NTF), and their transplantation at, or near, the site of damage, offers the hope of repairing degenerated tissues and curing the underlying pathology, rather than simply treating its symptoms.

BrainStorm’s approach has a high safety profile based on its use of autologous cells, which are free of the risk of rejection, tumor formation, controversy or ethical issues.

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

The Company holds exclusive worldwide rights to commercialize the technology, through a licensing agreement with Ramot, the technology transfer company of Tel Aviv University, Israel.

As a result of limited cash resources and the desire to take a faster path to clinical trials, since the fourth quarter of 2008 the Company has focused all of its efforts on ALS. However, the company intends to begin pre-clinical testing of Multiple Sclerosis during 2012.

In February 2011, the U.S. Food and Drug Administration (“FDA”) granted Orphan Drug designation to NurOwn, the Company’s autologous adult stem cell product candidate for the treatment of ALS. Orphan Drug status entitles BrainStorm to seven years of marketing exclusivity for NurOwn upon regulatory approval, as well as the opportunity to apply for grant funding from the US government of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA's application user fee.

In June 2011, BrainStorm initiated a Phase I/II clinical trial for the treatment of ALS with NurOwn at the Hadassah University Medical Center’s in Jerusalem, after receiving approval from the Israeli Ministry of Health (“MoH”). BrainStorm is the first company to receive clearance from the MoH to carry out a differentiated stem-cell based therapeutic clinical trial in Israel. The Company’s production process for manufacturing clinical grade MSC-NTF cells is in full compliance with Good Manufacturing Practice (“GMP”) requirements.

In January 2012, BrainStorm announced interim results of its Phase I/II clinical trial. The one month follow-up of the first four ALS patients treated with the Company's NurOwn therapy indicated that the therapy was safe, did not cause any adverse side effects, and showed some initial positive clinical indications.

Our efforts are currently directed at:

	·	Completing a Phase I/II clinical trial in Israel;
	·	Initiating a Phase II clinical trial in the USA;
	·	Initiating pre-clinical studies on Multiple Sclerosis; and
	·	Submitting an IND to the FDA.

Our Approach

The Company's approach to treatment of neurodegenerative diseases with autologous adult stem cells includes a multi-step process beginning with harvesting of undifferentiated stem cells from the patient's own bone marrow, and concluding with transplantation of differentiated, neurotrophic factor-secreting mesenchymal stem cells (MSC-NTF) into the same patient – intrathecally (IT) and/or intramuscularly (IM). This approach is based on pre-clinical data documented by our research team, led by Prof. Melamed and Prof. Offen.

Melamed and Offen's group has shown that human bone marrow mesenchymal stem cells can be expanded and induced to differentiate into two types of brain cells, neuron-like and astrocyte-like, each having different therapeutic potential, as follows:

In-vitro differentiation of the expanded human bone marrow derived mesenchymal stem cells in a proprietary medium led to the generation of neurotrophic-factors secreting cells. The in-vitro differentiated cells were shown to express and secrete GDNF, as well as other NTFs, into the growth medium. GDNF is a neurotrophic-factor, previously shown to protect, preserve and even restore neuronal function, particularly dopaminergic cells in PD, but also neuron function in other neurodegenerative pathologies such as ALS and Huntington’s disease. Unfortunately, therapeutic application of GDNF is hampered by its poor brain penetration and stability. Attempting to infuse the protein directly to the brain is impractical and the alternative, using GDNF gene therapy, suffers from the limitations and risks of using viral vectors. Our preliminary results show that our NTF secreting cells, when transplanted into a 6-OHDA lesion PD rat model, show significant efficacy. Within weeks of the transplantation, there was an improvement of more than 50% in the animals’ characteristic disease symptoms.

We have optimized the proprietary processes for induction of differentiation of human bone marrow derived mesenchymal stem cells into differentiated cells that produce NTF (MSC-NTF). The optimization and process development is conducted in Good Manufacturing Practice (“GMP”) compliance.

NurOwn program one (current) – Based on the above pre-clinical results, the Company initiated a Phase I/II clinical trial at the Hadassah Medical Center in June 2011 for treatment of ALS patients with MSC-NTF cells. An interim report of this ongoing clinical trial will be submitted to the Ministry of Health in Q3 2012.

NurOwn program two (future) – Based on positive proof-of-concept results with MSC-NTF cells for Multiple Sclerosis (MS), the Company plans to initiate a pre-clinical study for this disease in Q2 2012.

Our approach comprises the following steps:

Bone marrow aspiration from patient;

Isolation and expansion of the mesenchymal stem cells;

Differentiation of the expanded stem cells into neurotrophic-factor secreting (MSC-NTF) cells; and

Autologous transplantation into the patient at the site of damage.

Results of Operations

The Company has been a development stage company since its inception. For the period from inception (September 22, 2000) until March 31, 2012, the Company has not generated any revenues from operations. The Company does not expect to generate revenues from operations until 2014 at the earliest. In addition, the Company has incurred operating costs and other expenses of approximately $879,000 during the three months ended March 31, 2012, and approximately $42,301,000 for the period from inception (September 22, 2000) until March 31, 2012. Operating expenses incurred since inception were approximately $17,513,000 for general and administrative expenses and $24,788,000 for research and development costs.

Research and Development, net:

Research and development expenses, net for the three months ended March 31, 2012 and 2011 were $369,000 and $270,000, respectively. In addition, our grant from The Office of the Chief Scientist increased by $140,000 to $240,000 for the three months ended March 31, 2012 from $100,000 for the three months ended March 31, 2011.

The increase in research and development expenses for the three months ended March 31, 2012 is primarily due to: (i) in June 2011, the Company began clinical trials in ALS patients, in Hadassah, under which the Company paid $340,000 in the three months ended March 31, 2012; (ii) an increase of $65,000 in payroll costs due to recruitment of four additional employees to conduct the clinical trials.

General and Administrative:

General and administrative expenses for the three months ended March 31, 2012 and 2011 were $510,000 and $258,000, respectively.

The increase in general and administrative expenses for the three month period ended March 31, 2012 from the three month period ended March 31, 2011 is primarily due to: (i) an increase of $170,000 in compensation expenses for stock granted to directors and employees; (ii) an increase of $70,000 in legal, audit and public relations activity.

Financial Expenses:

Financial income for the three months ended March 31, 2012 was $11,000, compared to a financial expense of $177,000 for the three months ended March 31, 2011.

The financial income for the three months ended March 31, 2012 is mainly from conversion exchange rate and income on deposits in banks. The financial expense for the three months ended March 31, 2011 is primarily attributable to $192,000 financial expense from conversion of debt to a subcontractor to our common stock, balanced by financial income of $15,000 due to the conversion exchange rate.

Net Loss:

Net loss for the three months ended on March 31, 2012 was $872,000, as compared to a net loss of $705,000 for the three months ended March 31, 2011. Net loss per share for the three months ended March 31, 2012 was $0.01, as it also was for the three months ended March 31, 2011.

The weighted average number of shares of common stock used in computing basic and diluted net loss per share for the three months ended March 31, 2012 was 126,591,262, compared to 108,895,199 for the three months ended March 31, 2011.

The increase in the weighted average number of shares of common stock used in computing basic and diluted net loss per share for the three months ended March 31, 2012 was due to (i) the issuance of shares in a private placement, (ii) the exercise of options and warrants and (iii) the issuance of shares to service providers.

Liquidity and Capital Resources

The Company has financed its operations since inception primarily through private sales of its common stock and warrants and the issuance of convertible promissory notes. At March 31, 2012, we had $1,775,000 in total current assets and $1,290,000 in total current liabilities.

Net cash used in operating activities was $746,000 for the three months ended March 31, 2012. Cash used for operating activities in the three months ended March 31, 2012 was primarily attributed to clinical trial costs, payroll costs, rent, outside legal and audit fee expenses and public relations expenses.

Net cash used in investing activities was $52,000 for the three months ended March 31, 2012.

Net cash provided by financing activities was $20,000 for the three months ended March 31, 2012 is primarily attributable to exercise of options to common stock.

Our material cash needs for the next 12 months include the payments due under an agreement with Hadassah to conduct clinical trials in ALS patients, under which we must pay to Hadassah an amount of (i) up to $32,225 per patient (up to $773,400 in the aggregate) and (ii) $65,000 per month for rent and operation of the GMP facilities in anticipation of Hadassah's clinical trials.

Our other material cash needs for the next 12 months will include payments of (i) employee salaries, (ii) patents, (iii) construction fees for facilities to be used in our research and development and (iv) fees to our consultants and legal advisors.

We will need to raise substantial additional capital in order to meet our anticipated expenses. If we are not able to raise substantial additional capital, we may not be able to continue to function as a going concern and we may have to cease operations. Even if we obtain funding sufficient to continue functioning as a going concern, 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. Our ability to fund these future capital requirements will depend on many factors, including the following:

our ability to obtain funding from third parties, including any future collaborative partners;

the scope, rate of progress and cost of our clinical trials and other research and development programs;

the time and costs required to gain regulatory approvals;

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

the costs of filing, prosecuting, defending and enforcing patents, patent applications, patent claims, trademarks and other intellectual property rights;

the effect of competition and market developments; and

future pre-clinical and clinical trial results.

Critical Accounting Policies

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

There were no significant changes to our critical accounting policies during the quarter ended March 31, 2012. 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, 2011.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Item 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, as a result of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not 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 Securities and Exchange Commission’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.

Internal Control Over Financial Reporting

Management identified the following material weakness in its assessment of the effectiveness of internal control over financial reporting as of December 31, 2011, which continued to exist as of March 31, 2012:

The Company did not maintain effective controls over certain aspects of the financial reporting process because we lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with the Company’s financial reporting requirements.

Nevertheless, based on a number of factors, including the performance of additional procedures performed by management designed to ensure the reliability of our financial reporting, our Chief Executive Officer and Chief Financial Officer believe that the consolidated financial statements included with this quarterly report fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for the periods, presented, in conformity with U.S. GAAP.

Management’s Remediation Initiatives

We plan to develop policies and procedures for training of personnel or external advisers to verify that we have a sufficient number of personnel with knowledge, experience and training in the application of generally accepted accounting principles commensurate with our financial reporting and U.S. GAAP requirements. Where necessary, we will supplement personnel with qualified external advisors. Additionally, where appropriate, we plan to identify training courses on accounting principles and procedures that would benefit our accounting and finance personnel.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of legal proceedings affecting the Company refer to Part I, Item 3, “Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. There were no additional material developments to the legal proceedings affecting the Company in the fiscal quarter ended March 31, 2012.

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, other than as described in Part I, Item 3, “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, the adverse outcome of which, in management’s opinion, would have a material adverse effect on our business, results of operation or financial condition.

Item 1A. Risk Factors.

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, 2011. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, 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, 2011 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On April 13, 2012, pursuant to the Hadasit Agreement, we issued a warrant to purchase up to 33,334 shares of our common stock at an exercise price of $0.00005 per share, exercisable for a period of 10 years, to Hadasit Medical Research Services and Development Ltd. The issuance of these securities was effected without registration in reliance upon Regulation D promulgated under the Securities Act. No underwriters were involved with the issuance of such securities and no commissions were paid in connection with such transactions.

On April 22, 2012, we issued 834,729 shares of our common stock to Yossef Levy in connection with his exercise of a warrant to purchase common stock previously issued. The exercise price paid upon exercise of the warrant was $0.01 per share for a total of $8,347, which has been received by us. The issuance of these securities was effected without registration in reliance on Section 4(2) of the Securities Act as a sale by the Company not involving a public offering. No underwriters were involved with the issuance of such securities.

Item 5. Other Information.

On May 10, 2012, the Company entered into a Warrant Amendment Agreement (the “Amendment”) with ACCBT Corp. (the “Investor”), a company under the control of Mr. Chaim Lebovits, the President of the Company, pursuant to which the Company and the Investor agreed to amend each warrant previously issued by the Company to the Investor.

Pursuant to the Amendment, upon effectiveness of a six month lock-up agreement entered into by the Investor in connection with a proposed offering of common stock by the Company, the then current expiration date for each warrant held by the Investor shall be automatically extended by an additional 18 months. If the proposed offering is not completed by October 31, 2012, the Amendment will automatically terminate and be of no further force or effect.

As previously disclosed, pursuant to the terms of a certain Subscription Agreement, the Company agreed to sell to the Investor up to 27,500,000 shares (the “Subscription Shares”) of the Company’s common stock for an aggregate subscription price of up to $5.0 million and for no additional consideration, if the Investor purchased the Subscription Shares, warrants to purchase up to 30,250,000 shares of common stock . Per the terms of the Subscription Agreement, as amended to date, the current expiration date for each warrant held by the Investor is November 5, 2013.

The foregoing description is subject to, and qualified in its entirety by, the Amendment filed as an exhibit hereto and incorporated herein by reference.

During the quarter ended March 31, 2012, 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.

Item 6. Exhibits.

The Exhibits listed in the Exhibit Index immediately preceding such Exhibits are filed with or incorporated by reference in this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BRAINSTORM CELL THERAPEUTICS INC.

May 11, 2012	By:	/s/ Adrian Harel
		Name: Adrian Harel
		Title: Acting Chief Executive Officer (Principal Executive Officer)


May 11, 2012	By:	/s/ Liat Sossover
		Name: Liat Sossover
		Title: Chief Financial Officer (Principal Financial Officer)

EXHIBIT INDEX

Exhibit Number		Description

10.1		Warrant Amendment Agreement, dated as of May 10, 2012, by and between Brainstorm Cell Therapeutics Inc. and ACCBT Corp.

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Label Linkbase Document

101.PRE*		XBRL Taxonomy Presentation Linkbase Document

Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.