BRAINSTORM CELL THERAPEUTICS INC. - Quarter Report: 2009 March (Form 10-Q)

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ________ to ________.

Commission File Number 333-61610

BRAINSTORM CELL THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

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

110 East 59th Street

New York, NY 10022

(Address of principal executive offices)

(212) 557-9000

(Registrant's telephone number, including area code)

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 o

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 ¨ 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 o No x

As of May 14, 2009, the number of shares outstanding of the registrant’s common stock, $0.00005 par value per share, was 55,241,418.

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		28
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4T. Controls and Procedures		32

PART II

Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 5. Other Information		33
Item 6. Exhibits		33

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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, 2009

UNAUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

	Page

Consolidated Balance Sheets	4

Consolidated Statements of Operations	5

Statements of Changes in Stockholders' Equity (Deficiency)	6 - 10

Consolidated Statements of Cash Flows	11

Notes to Consolidated Financial Statements	12 - 27

-3-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share data)

	March 31,			December 31,
	2009			2008
	Unaudited			Audited
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	2		$	2
Restricted cash		32			36
Accounts receivable and prepaid expenses		43			21

Total current assets		77			59

LONG-TERM INVESTMENTS:
Prepaid expenses		6			11
Severance pay fund		54			62

Total long-term investments		60			73

PROPERTY AND EQUIPMENT, NET		704			743

Total assets	$	841		$	875

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Short term Credit from bank	$	37		$	72
Trade payables		764			744
Other accounts payable and accrued expenses		1,865			1,672
Short-term convertible loans		175			172
Short-term loans		200			199

Total current liabilities		3,041			2,859

ACCRUED SEVERANCE PAY		81			92

Total liabilities		3,122			2,951

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY:
Stock capital: (Note 7)
Common stock of $0.00005 par value - Authorized: 800,000,000 shares at March 31, 2009 and December 31,2008; Issued and outstanding: 55,241,418 shares at March 31, 2009 and December 31, 2008,		3			3
Additional paid-in-capital		34,190			33,881
Deficit accumulated during the development stage		(36,474	)		(35,960	)

Total stockholders' deficiency		(2,281	)		(2,076	)
Total liabilities and stockholders' deficiency	$	841		$	875

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

-4-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share data)

	Three months ended March 31,					Period from September 22, 2000 (inception date) through March 31,
	2009		2008			2009
	Unaudited					Unaudited
Operating costs and expenses:

Research and development, net	$	289	$	590		$	21,793
General and administrative		251		544			11,940

Total operating costs and expenses		540		1,134			33,733

Financial income (expenses), net		26		(128	)		(2,524	)

		514		1,262			36,257
Taxes on income		-		-			53

Loss from continuing operations		514		1,262			35,310
Net loss from discontinued operations		-		-			164

Net loss	$	514	$	1,262		$	36,474

Basic and diluted net loss per share from continuing operations	$	0.01	$	0.03

Weighted average number of shares outstanding used in computing basic and diluted net loss per share		55,241,418		41,774,344

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

-5-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

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 September 22, 2000 (date of inception)		-		$	-	$	-	$	-	$	-		$	-

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		10,100,000			1		84		-		(17	)		68

Contribution of capital		-			-		11		-		-			11
Net loss		-			-		-		-		(26	)		(26	)

Balance as of March 31, 2002		10,100,000			1		95		-		(43	)		53

Contribution of capital		-			-		15		-		-			15
Net loss		-			-		-		-		(47	)		(47	)

Balance as of March 31, 2003		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		10,238,000		$	1	$	131	$	-	$	(163	)	$	(31	)

-6-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

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, 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.

-7-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

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 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 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 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.

-8-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands (except share data)

					Additional paid-in				Deficit accumulated			Total
					Capital and		Deferred		during the			stockholders'
	Common stock				subscription on		stock-based		development			equity
	Number		Amount		shares		compensation		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.

-9-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

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'
	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		-		-		9		-		-			9
Stock-based compensation related to stock and options granted to directors and employees		-		-		109		-		-			109
Subscription of shares for private placement at $0.1818 per unit		-		-		191		-		-			191
Net loss		-		-		-		-		(514	)		(514	)

Balance as of March 31, 2009		55,241,418	$	3	$	34,190	$	-	$	(36,474	)	$	(2,281	)

* Represents an amount less than $1.

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

-10-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

UNAUDITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Three months ended March 31,						Period from September 22, 2000 (inception date) through March 31,
	2009			2008			2009
Cash flows from operating activities:
Net loss	$	(514	)	$	(1,262	)	$	(36,474	)
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		39			33			557
Severance pay, net		(4	)		(6	)		27
Accrued interest on loans		4			41			434
Amortization of discount on short-term loans		-			36			1,865
Change in fair value of options and warrants		-			-			(795	)
Expenses related to shares and options granted to service providers		9			70			20,175
Amortization of deferred stock-based compensation related to options granted to employees		109			199			4,997
Decrease (increase) in accounts receivable and prepaid expenses		(21	)		70			(42	)
Increase (decrease) in trade payables		20			(26	)		764
Increase in other accounts payable and accrued expenses		193			182			1,859
Erosion of restricted cash		3			(3	)		(3	)
Net cash used in continuing operating activities	$	(162	)	$	(666	)	$	(6,472	)
Net cash used in discontinued operating activities		-			-			(23	)
Total net cash used in operating activities	$	(162	)	$	(666	)	$	(6,495	)

Cash flows from investing activities:
Purchase of property and equipment	$			$	(157	)	$	(1,080	)
Restricted cash		-			-			(29	)
Investment in lease deposit		5			(7	)		(6	)
Net cash used in continuing investing activities	$	5		$	(164	)	$	(1,115	)
Net cash used in discontinued investing activities		-			-			(16	)
Total net cash used in investing activities	$	5		$	(164	)	$	(1,131	)

Cash flows from financing activities:
Proceeds from issuance of Common stock, net	$	191		$	730		$	6,059
Proceeds from loans, notes and issuance of warrants, net		-			-			2,061
Credit from bank		(34	)		11			38
Proceeds from exercise of warrants and options		-			3			28
Repayment of short-term loans		-			-			(601	)
Net cash provided by continuing financing activities	$	157		$	744		$	7,585
Net cash provided by discontinued financing activities		-			-			43
Total net cash provided by financing activities	$	157		$	744		$	7,628
Increase (decrease) in cash and cash equivalents		-			(86	)		2
Cash and cash equivalents at the beginning of the period		2			86			-
Cash and cash equivalents at end of the period	$	2		$	-		$	2

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

-11-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 1

GENERAL

	A.	On July 8, 2004, the Company entered into a licensing agreement with Ramot of Tel Aviv University Ltd. ("Ramot"), an Israeli corporation, to acquire certain stem cell technology (see Note 3). Subsequent to this agreement, the Company decided to focus on the development of novel cell therapies for neurodegenerative diseases, particularly Parkinson's disease, based on the acquired technology and research to be conducted and funded by the Company.
		Following the licensing agreement dated July 8, 2004, the management of the Company 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 ("SFAS") 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".

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 owns all operational property and equipment.

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

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

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

Since its inception, the Company has devoted substantially most 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" ("SFAS No. 7").

	GOING CONCERN

	As reflected in the accompanying financial statements, the Company’s operations for the three months ended on March 31, 2009, resulted in a net loss of $514 and the Company’s balance sheet reflects a net stockholders’ deficiency of $2,281, accumulated deficit of $36,474 and working capital deficiency of $2,964. These conditions 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. Management’s plans in this regard include, among others, raising additional cash from current and potential stockholders and lenders.

-12-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 1

GENERAL (Cont.)

GOING CONCERN (Cont.)

Accordingly, As a result of the current economic situation and the difficulty to raise immediate fund to support all of the Company’s projects, the Company decided to reduce its activity and downsize it workforce and focus only on the effort to reach clinical trials in ALS in 2009.

The Company also reduced its general and administrative expenses and ceased and delayed some development projects until it is able to obtain sufficient financing. There can be no assurance that sufficient revenues will be generated and that additional funds will be available on terms acceptable to the Company, or at all.

The Company depends on Ramot to conduct its research and development activities. As discussed in Note 4, the Company did not make a certain payment in 2008 to Ramot. As a result, the Company did not meet the payment schedule according to the agreement with Ramot and Ramot is entitled to terminate the research and license agreement.

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, 2008, 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 fully owned subsidiary as of March 31, 2009 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, 2009, are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

-13-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 4 - RESEARCH AND LICENSE AGREEMENT

On July 26, 2007, the Company entered into a Second Amended and Restated Research and License Agreement with Ramot. On August 1, 2007, 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 Amended Research and License Agreement, dated March 30, 2006, and waived all claims against the Company resulting from the Company's previous defaults and non-payment under the Original Agreement and the Amended Research and License Agreement. The payments described in the waiver and release covered all payment obligations that were past due and not yet due pursuant to the Original Agreement. The waiver and release amends and restates the original payment schedule under the Original Agreement as follows:

Payment date	Amount

September 5, 2007		100
November 20, 2007		150
February 20, 2008		150
May 20, 2008		150
August 4, 2008		90

In addition, in the event that the "research period," as defined in the Amended Research and License Agreement, is extended for an additional three year period in accordance with the terms of the Amended Research and License Agreement, then the Company is obligated to the following payments to Ramot during the first year of the extended research period:

Payment date	Amount

August 4, 2008		60
November 20, 2008		150
February 20, 2009		170

If the Company fails to make a payment to Ramot on any required payment date, and the Company does not cure the default within seven business days of notice of the default, all claims of Ramot against the Company, which were waived and released by the waiver and release, may be reinstated.

As of May 13, 2009, the Company paid to Ramot the first three payments total of $400 but has not made yet the last two payments total of $240 and for the extended research period. As a result, the Company is in breach of the new agreement with Ramot and Ramot may terminate the research and license agreement. The Company is negotiating with Ramot to postpone the payments.

On March 2009, the Company got a breach warning from Ramot and the parties are currently negotiating an updated agreement to postpone the payments .

-14-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 4 - RESEARCH AND LICENSE AGREEMENT (Cont.)

The Company's total current obligation to Ramot as of March 31, 2009, is in the amount of $867. The amount includes $570 for the extended research period.

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"), upon which the Consultants shall 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 March 31, 2009, the Company has a total obligation of $262 for services rendered by the Consultants.

NOTE 6 - SHORT-TERM LOANS

On April 13, 2008, the Company entered into a new agreement with a lender which the lender agreed to partially defer and partially convert to the Company’s Common Stock the payment of $1,250 owed by the Company to the lender based on the payment agreement between the two parties.

Pursuant to the new agreement, the Company agreed to pay $250 of the Debt in accordance with the following schedule:

Payment date	Amount

May 30, 2008		50
July 31, 2008		50
September 30, 2008		50
December 31, 2008		50
February 28, 2009		50

-15-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 6 - SHORT-TERM LOANS (Cont.)

In addition, the Company issued 2,857,142 shares of common stock to the lender in lieu of the repayment of $1,000 of the Debt.

The lender agreed that upon payment of the foregoing amounts in accordance with the foregoing schedule and the receipt of the stock grant, all of the Company’s outstanding obligations owed to the lender under the notes will be satisfied in full. The lender also waived any breach or default that may have arisen prior to the date of the new agreement from the failure of the Company to make payments to the lender under any of past agreements.

As of March 31, 2009 the Company paid the first payment to the lender and the last four installments had not yet been paid. On April 2,2009 the Company and the lender agreed to convert the entire debt of $200 to 2,500,000 restricted shares of common stock.

Since the outcome of the issuance of the shares was to relieve the debtor from its obligation, based on guidance in FASB No 140 “Accounting for Transfer and Servicing of Financial Assets and Eextinguishment of Liabilities“ the company derecognized the liability with the difference recognized in earning.

NOTE 7 - 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.

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 for total proceeds of $149 at a price of $0.8 per share.

-16-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7 - STOCK CAPITAL (Cont.)

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

Private placements: (Cont.)

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

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 September 30, 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 shall 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 (Note 8i))			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

At each closing date, the Company shall deliver to the investor the number of shares and warrants, subject to customary closing conditions and the delivery of funds, described above. The warrants shall have the following exercise prices: (i) the first 10,083,333 warrants have an exercise price of $0.20 per share; (ii) the next 10,083,333 warrants will have an exercise price of $0.29 per share; and (iii) the final 10,083,334 warrants issued will have an exercise price of $0.36 per share. All warrants will expire on November 5, 2011.

-17-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7:- STOCK CAPITAL (Cont.)

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

Private placements: (Cont.)

Cont.

As of March 31,2009, the investor completed payment of the first four installments and $ 472 of the fifth installment and the Company issued to the investor and its designee an aggregate of 19,250,000 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 , a warrant to purchase 10,083,333 shares of common stock at an exercise price of $0.29 per share and a warrant to purchase 1,008,334 shares of common stock at an exercise price of $0.36 per share. The warrants may be exercised at any time and expire on November 5, 2011.

The investor did not complete its obligation based on the investment agreement above. The Company is negotiating with the investor on continuance of payments.

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 March 31, 2009, 875,000 shares of Common Stock had been issued as an introduction fee.

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.

-18-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7:- 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.)

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 to amend and restate 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.

As of March 31, 2009, 5,151,684 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 options are fully vested and expire after 10 years.

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

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 options are fully vested and expire after 10 years. The compensation related to the options, 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 changes 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 option.

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

-19-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7:- 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 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 CEO an option to purchase 1,000,000 shares of Common Stock at an exercise price of $0.87 per share. The option vests with respect to 1/6 of the option on each six month anniversary 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.

On November 5, 2008, the Company entered into an amendment to the Company's option to purchase 1,000,000 shares of common stock agreement with the Company's CEO. The amendment changes the exercise price of the option 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.

-20-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7:- 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.)

There was no change in the company options to employees and directors activity during the three months ended March 31, 2009.

Restricted shares to directors:

On May 2, 2006, the Company issued to two of its directors 200,000 restricted shares of common stock (100,000 each). The restricted shares are subject to the Company's right to repurchase them at a purchase price of par value ($0.00005). The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date. The compensation related to the stocks issued amounted to $104, which will be 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 its director 100,000 restricted shares of common stock. The restricted shares are subject to the Company's right to repurchase them at a purchase price of par value ($0.00005). The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date. The compensation related to the shares issued amounted to $47, which will be 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 its director 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.

Shares and warrants to service providers:

The Company accounts for shares and warrant grants issued to non-employees using the guidance of SFAS 123(R), "Accounting for Stock-Based Compensation" and EITF 96-18, "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services," 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.

-21-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7:- STOCK CAPITAL (Cont.)

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

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

Warrants:

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

November 2004		12,800,845		3,141,925		40,000		9,618,920		0.01		9,618,920	November 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		47,500	May 2010
June 2005		30,000						30,000		0.75		30,000	June 2010
August 2005		70,000				70,000		-		0.15		-	-
September 2005		3,000		3,000				-		0.15		-	-
September 2005		36,000						36,000		0.75		36,000	September 2010
September-December 2005		500,000				500,000		-		1		-	-
December 2005		20,000		20,000				-		0.15		-	-
December 2005		457,163						457,163		0.15		457,163	July 2010
February 2006		230,000						230,000		0.65		230,000	February 2008
February 2006		40,000						40,000		1.5		40,000	February 2011
February 2006		8,000						8,000		0.15		8,000	February 2011
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		48,000	May - December 2011
May -December 2006		48,000						48,000		0.75		48,000	May - December 2011
May 2006		200,000						200,000		1		200,000	May 2011
June 2006		24,000						24,000		0.15		24,000	June 2011
May 2006		19,355						19,355		0.15		19,355	May 2011
October 2006		630,000		630,000				-		0.3		-	-
December 2006		200,000				200,000		-		0.45		-	-
March 2007		200,000						200,000		0.47		200,000	March 2012
March 2007		500,000						500,000		0.47		333,333	March 2017
March 2007		50,000						50,000		0.15		50,000	March 2010
March 2007		15,000						15,000		0.15		15,000	February 2012
February 2007		50,000				50,000		-		0.45		-	-
March 2007		225,000				225,000		-		0.45		-	-
March 2007		50,000						50,000		0.45		50,000	March 2010
April 2007		33,300						33,300		0.45		33,300	April 2009
May 2007		250,000				250,000		-		0.45		-	-
July 2007		500,000						500,000		0.39		277,778	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 2011
July 2007		30,000						30,000		0.45		30,000	July 2009
July 2007		100,000						100,000		0.45		100,000	July 2010
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 2011
November 2007		2,016,667						2,016,667		0.29		2,016,667	November 2011
April 2008		4,537,500						4,537,500		0.29		4,537,500	November 2011
August 2008		3,529,166						3,529,166		0.29		3,529,166	November 2011
August 2008		1,083,333						1,083,333		0.36		1,008,333	November 2011
November 2008		100,000						100,000		0.15		100,000	September 2018

		43,323,970		5,692,621		3,321,112		34,310,237				33,921,349

-22-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7 - STOCK CAPITAL (Cont.)

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

Shares and warrants to service providers: (Cont.)

Warrants:

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 year ended December 31, 2008 and December 31, 2007; weighted average volatility of 126%-165% and 108%, 93%-115%, respectively, risk free interest rates of 0.37%-2.12% and 3.3%-4.5%, respectively dividend yields of 0% and a weighted average life of the options of 1-9 and 6-7 years, respectively.

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, is 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 according to 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. The restricted shares are subject to the Company's right to repurchase them within one year of the grant date as follows: (i) in the event that the service provider breaches his obligations under the agreement, the Company shall have the right to repurchase the restricted shares at a purchase price equal to par value; and (ii) in the event that the service provider has not breached his obligations under the agreement, the Company shall have the right to repurchase the restricted shares at a purchase price equal to the then fair market value of the restricted shares.

In March and April 2005, the Company signed an agreement with four members of its Scientific Advisory Board according to 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). The restricted shares will be subject to the Company's right to repurchase them if the grantees cease to be members of the Company's Advisory Board for any reason. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

-23-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7 - STOCK CAPITAL (Cont.)

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

Shares and warrants to service providers: (Cont.)

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. The restricted shares are subject to the Company's right to repurchase them within 12 months from the grant date as follows: (i) in the event that the service providers breach their obligations under the agreement, the Company shall have the right to repurchase the restricted shares at a purchase price equal to the par value; and (ii) in the event that the service providers have not breached their obligations under the service agreements, the Company shall have the right to repurchase the restricted shares at a purchase price equal to the fair market value of the restricted shares. 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 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.

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.

On June 7, 2006, the Company issued 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 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 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 to a service provider. Related compensation in the amount of $35 was recorded as general and administrative expense.

-24-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7 - STOCK CAPITAL (Cont.)

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

Shares and warrants to service providers: (Cont.)

On September 17, 2006, the Company issued to its legal advisor 231,851 shares of Common Stock. The shares are in lieu of $63 payable to the legal advisor.

During 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. The shares are for the $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. The shares issued are for the $15 payable to the service provider. Related compensation in the amount of $30 was recorded as general and administrative expense. In addition, the Company is 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) is less than $0.20, on March 20, 2008. In no event shall the Company issue more than 30,000 additional shares to the service providers. 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. The shares are for $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. The shares are for $33, payable to the legal advisor. Related compensation in the amount of $33 was recorded as general and administrative expense.

-25-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 7:- STOCK CAPITAL (Cont.)

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

Shares and warrants to service providers: (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 finance advisor 90,000 shares of the Company's common stock. The shares are for $35 payable to the finance advisor for introduction fee of past convertible loans. Related compensation in the amount of $36 is recorded as finance expenses.

There was no change in the Company's stock awards activity related to shares issued to service providers during the three months ended March 31,2009

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

	Three months ended March 31,				Period from September 22, 2000 (inception date) through March 31,
	2009		2008		2009

Research and development		30		45		16,655
General and administrative		88		205		7,671
Financial expenses, net		-		-		56
Total stock-based compensation expense		118		250		24,382

-26-

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARY

(A development stage company)

NOTE 8 - SUBSEQUENT EVENTS

On April 13, 2009 , the Company's Board passed the following resolutions:

Issuance of 250,000 restricted shares to a Company advisor. The shares are for $25 unpaid debt to the advisor.

Grant option to purchase 200,000 shares of Common Stock at an exercise price of $0.1 per share to the Company's legal advisor for legal services. The option vests and become exercisable on the first anniversary of the grant date.

Election Abraham (Rami) Efrati, the company's CEO, to the Board of Directors.

On April 2, 2009 the Company and a lender agreed of Issuance of 2,500,000 restricted shares of common stock to the lender. The shares are for the $200 unpaid loan to the lender (see note 6b).

On April 5, 2009 the company and it's chief technology advisor agreed of Issuance of 1,800,000 restricted shares of common stock to the chief technology advisor. The shares are for the $180 unpaid debt to the advisor.

-27-

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, 2008. 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 leading company developing stem cell therapeutic products based on breakthrough technologies enabling the in-vitro differentiation of bone marrow stem cells to neural-like cells. We aim to become a leader in adult stem cell transplantation for neurodegenerative diseases. Our focus is on utilizing the patient’s own bone marrow stem cells to generate neuron-like cells that may provide an effective treatment initially for Amyotrophic Lateral Sclerosis (“ALS”), Parkinson’s Disease (“PD”) and spinal cord injury.

Our core technology was developed through a collaboration between prominent neurologist, Prof. Eldad Melamed, the 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 Dr. Daniel Offen, of the Felsenstein Medical Research Center of Tel Aviv University.

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The Company’s team is among the first to demonstrate creation of neurotrophic-factor secreting cells (glial cells) from in-vitro differentiated bone marrow cells that produce neurotrophic factors (“NTF”) including GDNF, BDNF, NGF and IGF-1.

The team is also among the first to have successfully demonstrated release of dopamine from in-vitro differentiated bone marrow cells. Moreover, in research conducted by this team, implantation of these differentiated cells into brains of animal models that had been induced to Parkinsonian behavior markedly improved their symptoms.

Our aim is to provide neural stem cell transplants that (i) “replace” damaged dopaminergic nerve cells and diseased tissue by augmentation with healthy dopamine producing cells; and (ii) maintain, preserve and restore the damaged and remaining dopaminergic cells in the patient’s brain, protecting them from further degeneration.

The Company holds exclusive worldwide rights to commercialize the technology, through a licensing agreement with Ramot, the technology transfer company of Tel Aviv University. The agreement also provides for further research, funded by Brainstorm, to be performed by Prof. Melamed, Dr. Offen and members of their research team at the Felsenstein Medical Research Center. The results of this research are licensed to us under the terms of the license agreement.

We are currently in the developmental stage of our technology and products and we are going to begin the process of seeking regulatory approval from regulatory agencies in the U.S., Israel and Europe. Our efforts are directed at the development of the technology from the lab to the clinic with the following main objectives:

Developing the cell differentiation process according to Food and Drug Administration (“FDA”) and the European agency for evaluation of medical product (“EMEA”) guidelines;

Demonstrating safety and efficacy first in animals and then in human patients; and

Setting up centralized facilities to provide NurOwn™ therapeutic products and services for transplantation in patients.

As a result of limited cash resources at this time and the faster path through necessary clinical trials, the Company determined in the forth quarter of 2008 to focus all of its efforts on ALS, and will for now will not allocate resources towards PD or other Neurodegenerative diseases. As a result of this new focus and the Company’s limited cash resources, the Company significantly downsized its employee base and employs only scientific employees that meet the Company immediate goal: to conduct clinical trials in ALS patients in Israel.

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, 2009, the Company has not earned any revenues from operations. The Company does not expect to earn revenues from operations until 2013. In addition, the Company has incurred operating costs and expenses of approximately $514,000 during the three months ending March 31, 2009, and approximately $36,474,000 for the period from inception (September 22, 2000) until March 31, 2009. Operating expenses incurred since inception were approximately $11,940,000 for general and administrative expenses and $21,793,000 for research and development costs.

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Research and Development, net:

Research and development expenses, net for the three months ended March 31, 2009 and 2008 were $289,000 and $590,000, respectively. The decrease of $301,000 in research and development expenses is primarily due to (i) the decrease in salary expenses as we had fewer employees due to the downsizing of the employee base in connection with the Company's current financial condition and (ii) the reduction in development activities as the Company decided to delay development activities in PD and other neurodegenerative diseases and focus solely on ALS.

General and Administrative

General and administrative expenses for the three months ended March 31, 2009 and 2008 were $251,000 and $544,000, respectively. The decrease of $293,000 in general and administrative expenses is primarily due to the decrease in (i) stock-based compensation expenses and salaries as we have fewer employees and (ii) other expenses as the Company has decreased activities due to the Company’s current financial condition.

Financial Expenses

Financial expenses decreased by $153,000 to income of $26,000 for the three months ended March 31, 2009 from expenses of $128,000 for the three months ended March 31, 2008.

The decrease in financial expenses is primarily attributable to a decrease in amortization of the discount on short-term convertible loans and the exchange differentials derived from the changes in the exchange rate between the New Israeli Shekel to U.S. dollar in the three months ended March 31, 2009.

Net Loss

Net loss for the three months ended March 31, 2009 was $514,000, as compared to a net loss of $1,262,000 for the three months ended March 31, 2008. Net loss per share for the three months ended March 31, 2009 was $0.01, as compared to a net loss per share of $0.03 for the three months ended March 31, 2008. The decrease in the net loss is mainly due to a (i) reduction in Company activities, (ii) downsizing of employees, (iii) decrease in stock-based compensation expenses and (iv) amortization of discount on short-term convertible loans. 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, 2009 was 55,241,418, compared to 41,774,344 for the three months ended March 31, 2008. This increase was due to (i) the issuance of shares in a private placement, (ii) the conversion of convertible loans, (iii) the exercise of warrants and (iv) 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, 2009, we had $77,000 in total current assets and $3,041,000 in total current liabilities.

Net cash used in operating activities was $162,000 for the three months ended March 31, 2009. Cash used for operating activities in the three months ended March 31, 2009 was primarily for payment of salaries and fees to our employees, consultants, subcontractors and service providers.

Net cash provided by financing activities was $157,000 for the three months ended March 31, 2009 and is primarily attributable to funds received from ACCBT Corp. under a certain subscription agreement.

We have a licensing agreement with Ramot under which we owe approximately $95,000 per quarter. In addition, we have an agreement with a lender under which we must pay approximately $25,000 over the next three months.

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Our other material cash needs for the next 12 months will include payment of employee salaries, payments for pre-clinical and clinical trials in ALS and animal experiments, lease payments, payments to Ramot, payments with respect to patents, payment of construction fees for facilities to be used in our research and development, payment of fees to our consultants and legal advisors and capital equipment expenses.

On July 2, 2007, we entered into a subscription agreement with ACCBT Corp., pursuant to which we agreed to sell and issue (i) up to 27,500,000 shares of our common stock for an aggregate subscription price of up to $5.0 million, and (ii) for no additional consideration, warrants to purchase up to 30,250,000 shares of our common stock. Subject to certain closing conditions, separate closings of the purchase and sale of the shares and the warrants were scheduled to take place from August 30, 2007 through November 15, 2008. To date, we have received an aggregate of approximately $4 million from ACCBT Corp. and we do not have an estimated date by when we expect the future payment of up to $1 million.

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.

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There were no significant changes to our critical accounting policies during the quarter ended March 31, 2009. 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, 2008.

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 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this 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, 2008, which continued to exist as of March 31, 2009:

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. Specifically, our Chief Financial Officer handles all accounting issues of the Company alone as the Company recently terminated the Company’s accountant as part of the downsizing of the Company’s staff.

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 on Form 10-Q 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

Subject to the Company’s ability to raise sufficient funds, we plan to recruit a new accountant and 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 on accounting principles and procedures that would benefit our accounting and finance personnel.

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Changes in Internal Control Over Financial Reporting

Other than as described above, no changes in our internal controls over financial reporting were identified during the quarter ended March 31, 2009 that materially affected, or are reasonably likely to materially affect, such internal control over financial reporting other than those remedial actions disclosed above.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

On April 17, 2008, Chapman, Spira & Carson, LLC (“CSC”) filed a breach of contract complaint in the Supreme Court of the State of New York (the “Court”) against the Company. The complaint alleges that CSC performed its obligations to the Company under a consulting agreement entered into between the parties and that the Company failed to provide CSC with the compensation outlined in the consulting agreement. The complaint seeks compensatory damages in an amount up to approximately $896,667, as well as costs and attorneys’ fees. On June 5, 2008, the Company filed an answer with the Court. The Company believes CSC’s claims are without merit. We intend to vigorously defend our actions. We cannot predict the scope, timing or outcome of this matter. We cannot predict what impact, if any, this matter may have on our business, financial condition, results of operations and cash flow.

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 legal proceedings, other than as described above, 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.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider 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, 2008, 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, 2008 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. There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Item 5. Other Information.

During the quarter ended March 31, 2009, 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.

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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 14, 2009	By:	/s/ Rami Efrati
		Name: Rami Efrati Title: Chief Executive Officer (Principal Executive Officer)

May 14, 2009	By:	/s/ David Stolick
		Name: David Stolick Title: Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number		Description

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.

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