Brainstorm Cell Therapeutics(BCLI) - 2019 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's interim financial statements, notes, and management's discussion and analysis Financial Statements The unaudited interim financial statements for June 30, 2019, reveal a net loss of $9.9 million and a $4.5 million stockholders' deficit, raising going concern doubts Interim Condensed Consolidated Balance Sheets Total assets decreased to $8.86 million, while liabilities surged to $13.38 million, resulting in a $4.52 million stockholders' deficit by June 30, 2019 Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2019 (Unaudited) | Dec 31, 2018 (Audited) | | :--- | :--- | :--- | | Total Current Assets | $5,535 | $10,270 | | Total Assets | $8,864 | $11,228 | | Total Current Liabilities | $10,543 | $6,212 | | Total Liabilities | $13,380 | $6,212 | | Total Stockholders' Equity (Deficit) | $(4,516) | $5,016 | Interim Condensed Consolidated Statements of Comprehensive Loss The company reported increased net losses of $4.9 million for Q2 and $9.9 million for H1 2019, primarily due to higher R&D expenses Statement of Comprehensive Loss (in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development, net | $3,554 | $1,481 | $7,010 | $2,458 | | General and administrative | $1,303 | $1,606 | $2,775 | $2,936 | | Operating Loss | $(4,857) | $(3,087) | $(9,785) | $(5,394) | | Net Loss | $(4,900) | $(3,091) | $(9,927) | $(5,389) | | Basic and diluted net loss per share | $(0.23) | $(0.16) | $(0.47) | $(0.28) | Interim Condensed Statements of Changes in Stockholders' Equity Stockholders' equity shifted from a $5.0 million positive balance to a $4.5 million deficit by June 30, 2019, mainly due to a $9.9 million net loss Changes in Stockholders' Equity (in thousands) | Description | Amount | | :--- | :--- | | Balance as of January 1, 2019 | $5,016 | | Net loss | $(9,927) | | Stock-based compensation | $390 | | Exercise of options/warrants | $5 | | Balance as of June 30, 2019 | $(4,516) | Interim Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $4.3 million for H1 2019, while investing activities provided $4.5 million, resulting in a slight cash increase to $1.13 million Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,343) | $(2,071) | | Net cash provided by (used in) investing activities | $4,522 | $(10,169) | | Net cash provided by financing activities | $5 | $12,019 | | Increase (decrease) in cash | $184 | $(221) | | Cash at end of period | $1,126 | $2,262 | Notes to Interim Condensed Consolidated Financial Statements Notes highlight a 'Going Concern' warning due to recurring losses, detail a $15.9 million CIRM grant, a $20 million ATM offering, and a $3.3 million post-period warrant exercise - The company's recurring operating losses and lack of revenue raise substantial doubt about its ability to continue as a going concern, with management planning to raise additional funds[24][26] - A $15.9 million grant from CIRM was received in July 2017 for the NurOwn® Phase 3 study, with $12.55 million received by June 30, 2019[45] - The company established a $20 million at-the-market (ATM) offering on June 11, 2019, though no shares were sold by June 30, 2019[52][54] - Post-quarter, on August 2, 2019, the company generated approximately $3.3 million in gross cash proceeds from a warrant exercise[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses progress on NurOwn® clinical trials for ALS and MS, reports increased net losses due to R&D, and addresses ongoing liquidity challenges requiring additional capital Company Overview and Recent Highlights Brainstorm, a biotech company, is advancing NurOwn® for ALS (Phase 3, over 75% enrolled) and Progressive MS (Phase 2), expanding into exosomes, and generated $1 million from patient treatments in Israel - The NurOwn® Phase 3 ALS trial is over 75% enrolled, with completion by Q3 2019 and top-line data expected in H2 2020[91] - The company expanded its cellular technology platform to include NurOwn®-derived exosomes for CNS disorder development[93] - Approximately $1 million was generated from treating 6 ALS patients in Israel via the Hospital Exemption pathway[94] NurOwn® Technology and Clinical Programs NurOwn® is an autologous MSC-based technology in pivotal Phase 3 for ALS, targeting rapid progressors, and in Phase 2 for Progressive MS, with top-line data for both expected in H2 2020 - NurOwn® technology utilizes autologous cells, mitigating rejection risk and eliminating the need for immunosuppressive agents[101] - The Phase 3 ALS trial targets rapid progressors, a subgroup with superior Phase 2 outcomes, using an ALSFRS-R score responder analysis as the primary endpoint[112][113] - A Phase 2 open-label trial for NurOwn® in progressive Multiple Sclerosis (MS) is recruiting 20 patients across 5 U.S. centers, with top-line data anticipated in H2 2020[118] Funding and Intellectual Property The company secured $15.9 million from CIRM (with $12.55 million received) and $3 million from IIA in non-dilutive funding, bolstering its IP portfolio of 14 granted patents and 24 pending applications - A non-refundable $15.9 million grant from CIRM supports the Phase 3 ALS study, with $12.55 million received to date[119] - The company received approximately $3 million in aggregate grants from the Israel Innovation Authority (IIA) in 2018 and 2019[120] - A European patent was granted in March 2019, covering the use of Mesenchymal Stem Cells for treating various CNS diseases, including ALS, MS, and Parkinson's[122] Results of Operations The company reported a net loss of $4.9 million ($0.23 per share) for Q2 2019, an increase from $3.1 million in 2018, primarily due to a $2.1 million rise in R&D expenses Comparison of Operating Results - Three Months Ended June 30 (in thousands) | Expense Category | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Research and Development, net | $3,554 | $1,481 | +$2,073 | | General and Administrative | $1,303 | $1,606 | -$303 | | Operating Loss | $4,857 | $3,087 | +$1,770 | | Net Loss | $4,900 | $3,091 | +$1,809 | Liquidity and Capital Resources The company's cash and equivalents totaled $2.7 million, with $3.5 million cash used in operations for the quarter, necessitating additional capital despite a $20 million ATM program and a $3.3 million post-quarter warrant exercise - Cash, cash equivalents, and short-term bank deposits totaled approximately $2.7 million[135] - Net cash used in operating activities was $3.5 million for Q2 2019, primarily for clinical trial costs, payroll, and rent[136] - An at-the-market (ATM) program allows the sale of up to $20 million in common stock, offering financial flexibility, with no sales in the quarter[139] - On August 2, 2019, the company raised approximately $3.3 million in gross proceeds from a warrant exercise agreement[140] Quantitative and Qualitative Disclosures About Market Risk This section has been omitted from the report because the company qualifies as a smaller reporting company - Market risk information is omitted as the Company qualifies as a smaller reporting company[144] Controls and Procedures Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were concluded to be effective as of June 30, 2019, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the period end[145] - No material changes to internal control over financial reporting occurred during the quarter[146] PART II– OTHER INFORMATION This section details legal proceedings, risk factors, other disclosures, and a comprehensive list of filed exhibits Legal Proceedings The company is not currently a party to any material legal proceedings that would be expected to have a material adverse effect on its business, financial condition, or results of operations - The company is not currently a party to any material legal proceedings[148] Risk Factors There have been no material changes from the risk factors that were previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 - No material changes occurred from the risk factors previously disclosed in the Annual Report on Form 10-K for FY2018[149] Other Information During the quarter ended June 30, 2019, the company made no material changes to the procedures by which stockholders may recommend nominees to its Board of Directors - No material changes were made to procedures for stockholder recommendations for Board nominees[150] Exhibits This section lists the documents filed as exhibits to the Form 10-Q, which include a Distribution Agreement related to the at-the-market offering, CEO and CFO certifications as required by the Sarbanes-Oxley Act, and XBRL data files - Filed exhibits include the ATM offering Distribution Agreement, Sarbanes-Oxley certifications, and XBRL instance documents[151]