UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2017March 31, 2020

For the transition period from _____________ to _____________

Commission File Number 001-36641

BRAINSTORM CELL THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

(201) 488-0460

(Registrant’s telephone number, including area code)

Not Applicable

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

Securities registered pursuant to Section 12(b) of the Act:

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. YesxNo¨

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).

Yesx No¨

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox

As of October 13, 2017,May 4, 2020, the number of shares outstanding of the registrant’s Common Stock, $0.00005 par value per share, was 18,842,726.29,440,732.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial StatementsStatements.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017MARCH 31, 2020

U.S. DOLLARS IN THOUSANDS

(Except share data and exercise prices)

(UNAUDITED)

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017MARCH 31, 2020

U.S. DOLLARS IN THOUSANDS

(Except share data and exercise prices)

(UNAUDITED)

INDEX

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCOMPREHENSIVE LOSS (UNAUDITED)

U.S. dollars in thousands

(Except share data)

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (AUDITED)

U.S. dollars in thousands

(Except share data)

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

U.S. dollars in thousands

(Except share data)

* Represents an amount less than $1.

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. dollars in thousands

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. dollars in thousands

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

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 1 - GENERAL

The Common Stock is publicly traded on the NASDAQ Capital Market under the symbol “BCLI”.

GOING CONCERN:

To date the Company has not generated revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial resources and through additional raises of capital.

Such conditions raise substantial doubts about the Company's ability to continue as a going concern. Management’s plan includes raising funds from outside potential investors. However, there is no assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

GOING CONCERN:

Since its inception, the Company has devoted substantially all of its efforts to research and development, clinical trials, recruiting management and technical staff, acquiring assets and raising capital. The Company is still in its development and clinical stage and has not yet generated revenues. The extent of the Company's future operating losses and the timing of becoming profitable are uncertain. The Company has funded its operations to date primarily through public and private sales of its Common Stock and warrants, the exercise of warrants, the issuance of convertible promissory notes, sales via ATM program and through grants from California Institute for Regenerative Medicine (CIRM) and the Israel Innovation Authority of the Ministry of Economy and Industry (the "IIA") (formerly the Office of the Chief Scientist of the Ministry of Economy and Industry (the "OCS)).

Additional funding will be required to complete the Company's research and development and clinical trials, to attain regulatory approvals, to begin the commercialization efforts and to achieve a level of sales adequate to support the Company's cost structure. To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, additional public and private sales of its Common Stock and warrants, the exercise of warrants, and the issuance of convertible promissory notes, sales with ATM program and other funding transactions. While the Company has been successful in raising financing recently and in the past, there can be no assurance that it will be able to do so in the future on a timely basis on terms acceptable to the Company, or at all. Uncertain market conditions and approval by regulatory bodies and adverse results from clinical trials may (among other reasons) adversely impact the Company's ability to raise capital in the future.

Management expects that the Company will continue to generate losses from the clinical development and regulatory activities, which will result in a negative cash flow from operating activity. This has led management to conclude that substantial doubt about the Company's ability to continue as a going concern exists. The Company's consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2019.

Operating results for the three months ended September 30, 2017,March 31, 2020, are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.2020.

Non royalty bearing Grants from the California Institute for Regenerative Medicine (CIRM) for funding research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from research and development expenses.

The other significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.

In May 2014, the Financial Accounting Standards Board issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for us beginning in the first quarter of 2018; early adoption is prohibited. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. As the Company has not incurred revenues to date, it is unable to determine to expected impact of the new standard on its consolidated financial statements.

In January 2016, the FASB issued an amended standard requiring change to recognition and measurement of certain financial assets and liabilities. The standard primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This standard is effective beginning in the first quarter of 2018. Certain provisions allow for early adoption. The Company do not expect that the adoption of this standard will have a significant impact on the financial position or results of operations.

In February 2016, the FASB issued a new lease accounting standard requiring that the Company recognize lease assets and liabilities on the balance sheet. This standard is effective beginning in the first quarter of 2019; early adoption is permitted. The Company has not yet determined the impact of the new standard on its consolidated financial statements.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Cont.):

In June 2016, the FASB issued a new standard requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. This standard is effective for us in the first quarter of 2020; early adoption is permitted beginning in the first quarter of 2019 and we are evaluating whether we will early adopt. It is required to be applied on a modified-retrospective approach with certain elements being adopted prospectively. The Company doesreviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not expectidentified any standards that the adoptionCompany believes merit further discussion. The Company believes that none of this standardthe new standards will have a significant impact on the financial position or results of operations.

In May 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to the terms and conditions of the award. The new guidance is effective on a prospective basis beginning on January 1, 2018 and early adoption is permitted. The Company does not expect the adoption of this standard to have an impact on its consolidated financial statements.

The preparation of financial statements in conformity with generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

NOTE 3 - RESEARCH AND LICENSE AGREEMENT

The Company hasentered into a Research and License Agreement, as amended and restated, with Ramot. The Company obtained a waiver and release from Ramot pursuant(the “License Agreement”). Pursuant to which Ramot agreed to an amended payment schedule regarding the Company's payment obligations underremuneration terms of 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.

The Company ishas agreed to pay Ramot royalties on Net Sales on aof the Licensed Product by Licensed Product and jurisdiction by jurisdiction basis as follows:

Capitalized terms set forth above which are not defined shall have the meanings attributed to them under the License Agreement.

NOTE 4 - SHORT TERM DEPOSITS

Short term investmentsdeposits on September 30, 2017March 31, 2020 and December 31, 20162019 include bank deposits bearing annual interest rates varying from 0.15% to 1.90%2.00%, with maturities of up to 10 and 56 months as of September 30, 2017March 31, 2020 and December 31, 2016.2019.

In JulyNovember 2017 the Company received an award inhas contracted with City of Hope's Center for Biomedicine and Genetics ("COH") to produce clinical supplies of NurOwn® adult stem cells for the amount of $15,912 from the California Institute of Regenerative Medicine (CIRM) to support the pivotalCompany’s ongoing Phase 3 study of NurOwn®, forclinical study. In 2017 the treatment of amyotrophic lateral sclerosis (ALS).Company has paid COH $2,665 advance payment. The award provided for a $5,250 project initial payment, whichadvance was received duringrecorded as prepaid expense and is amortized over the third quarter of 2017, and up to $15,912 in future milestone payments (inclusiveterm of the project initial payment). The award does not bear a royalty payment commitment nor isagreement. As of December 31, 2019, $276 were recorded as current prepaid expense. As of March 31, 2020, the award otherwise refundable.prepaid expenses were fully reduced.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 6 – LEASES

On January 1, 2019 the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the modified retrospective approach for all lease arrangements at the beginning of the period of adoption. Leases existing for the reporting period beginning January 1, 2019 are presented under ASU 2016-02. The Company leases facilities, clinical research rooms, and vehicles under operating leases. At March 31, 2020, the Company’s ROU assets and lease liabilities for operating leases totaled $1,917 and $2,016, respectively. The impact of adopting the new lease standard was not material to the Company’s condensed consolidated statement of operations for the periods presented.

Supplemental cash flow information related to operating leases was as follows (unaudited):

As of March 31, 2020, our operating leases had a weighted average remaining lease term of 1.72 years and a weighted average discount rate of 8.25%. Future lease payments under operating leases as of March 31, 2020 were as follows (unaudited):

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 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 publicly traded on the NASDAQ Capital Market under the symbol BCLI.Private placements and public offerings:

Warrant Exercise Agreement:

In July 2007,On August 2, 2019, the Company entered into an investment agreement, that was amended in August 2009 with ACCBT Corp. a company underWarrant Exercise Agreement which generated gross cash proceeds to the control of the Company’s current Chief Executive Officer, according to which for an aggregate considerationCompany of approximately $5 million$3.3 million. Pursuant to the agreement, certain holders (the “Holders”) of warrants issued by the Company issued 2,777,777on June 6, 2018 (the “2018 Warrants”) agreed to exercise 842,000 shares of Common Stock of their 2018 Warrants, at an amended exercise price of $3.90 per share, and athe Company agreed to issue new warrant shares to the Holders to purchase 672,222842,000 shares of Common Stock (the “New Warrants”), at an exercise price of $3$7.00, with an expiration date of December 31, 2021. The 2018 Warrants held by the Holders, to the extent not exercised, were also amended to reduce the exercise price to $7.00 per share and a warrant to purchase 1,344,444 shares of common stock at an exercise price of $4.35 per share. The warrants are exercisable, through November 5, 2017.extend the expiration date to December 31, 2021.

Our current Chief Executive Officer has served asSubject to limited exceptions, for the President90 days following the date of the Company since July 2007 and in addition has as Chief Executive Officer from August 2013 until June 2014. On September 28, 2015 he was reappointed and currently serves as Chief Executive Officer of the Company.

On September 28, 2015Warrant Exercise Agreement, neither the Company grantednor any Subsidiary will issue, enter into any agreement to its Chief Executive Officer an option to purchase 369,619issue or announce the issuance or proposed issuance of any shares of Common Stock, atwithout the prior written consent of the Holders of a majority of the New Warrant shares. The Company also agreed that during the time the New Warrants are unexercised, the Company will not enter into any agreements with any holder of 2018 Warrants with more favorable terms, without the consent of the Holders of a majority of the warrant shares then exercisable under all outstanding August 2019 Warrant Exercise Agreements.

The New Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The shares issuable upon exercise of the New Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349). The Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The issuance of the Exercised Shares and New Warrants is exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an exercise priceissuer not involving any public offering under Section 4(a)(2) of $2.45 per share. The option vested over 12 months until fully vested on August 28, 2016.the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act.

At-the-market (ATM) Offerings:

On July 26, 2017,June 11, 2019, the Company grantedentered into a Distribution Agreement with Raymond James & Associates, Inc. (“Raymond James”), pursuant to its Chief Executive Officer 31,185 shares of restricted common stock, which vests as to twenty-five percent (25%) of the award on each of the first, second, third and fourth anniversary of the date of grant, provided grantee remains continuously employed by the Company fromsold, through the date of grant through each applicable vesting date, and is subject to accelerated vesting upon a Change of Control (as defined in an agreement with grantee) of the Company. In the event of grantee’s termination of employment, any portion of the grant that is not yet vested (after taking into account any accelerated vesting) shall automatically be immediately forfeited to the Company, without the payment of any consideration to grantee.

On July 26, 2017, the Company granted to its Chief Executive Officer an option to purchase up to 41,580Raymond James, shares of Common Stock athaving an exercise price per shareaggregate offering amount of $4.81. The option is fully vested and exercisable$20,000,000 (the “June 11, 2019 ATM”) in an “at the market” offering as ofdefined in Rule 415 promulgated under the date of grant and shall remain exercisable untilSecurities Act, including, without limitation, by sales made directly on the 2nd anniversary ofNasdaq Capital Market. During the date of grant, regardless of whether grantee remains employed by the Company.

In February 2010,quarter ended March 31, 2020 the Company issued to three investorssold an aggregate 399,999of 3,598,833 shares of Common Stock and warrantspursuant to purchasethe June 11, 2019 ATM, at an aggregate of 199,998 shares of Common Stock with an exerciseaverage price of $7.50$4.96 per share, for aggregate proceeds of $1.5 million.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

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

On July 17, 2012, the Company raised a $5.7 million ofraising gross proceeds through a public offering (“2012 Public Offering”) of its common stock and warrants to purchase common stock. The Company issued a total of 1,321,265 shares of common stock ($4.35 per share), and thirty month warrants to purchase 990,949 shares of Common Stock at an exercise price of $4.35 per share. After deducting closing costs and fees, the Company received net proceeds of approximately $4.9$17.86 million. The Company paid to the placement agent, a cash fee and a corporate finance fee equal to 7% of the gross proceeds of the offering. In addition, the Company issued to the placement agent a two year warrant to purchase up to 32,931 shares of Common Stock, with an exercise price equal to $5.22.

On February 7, 2013, the Company issued 55,556 units to a private investor for total proceeds of $250. Each unit consisted of one share of Common Stock and a warrant to purchase one share of Common Stock at $7.5 per share exercisable for 32 months. On October 7, 2015 the warrants were cancelled.

On August 16, 2013, the Company raised $4 million, gross, through a registered public offering (“2013 Public Offering”) of its Common Stock and the issuance of warrants to purchase Common Stock.The Company issued a total of 1,568,628 Common Stock, ($2.55 per share) and three year warrants to purchase 1,176,471 shares of Common Stock, at an exercise price of $3.75 per share (the “2013 Warrants”). The Warrants also included, subject to certain exceptions, full ratchet anti-dilution protection in the event of the issuance of any Common Stock, securities convertible into common stock, or certain other issuances at a price below the then-current exercise price of the Warrants, which would result in an adjustment to the exercise price of the Warrants. After deducting closing costs and fees, the Company received net proceeds of approximately $3.3 million. In accordance with the provisions of ASC 815 (formerly FAS 133) the proceeds related to the warrants at the amount of $829 were recorded to liabilities at the fair value of such warrants as of the date of issuance, and the proceeds related to common stocks of 2,496 were recorded to equity.

On April 25, 2014, the Company entered into agreements with some of holders of the 2013 Warrants to exchange warrants to purchase an aggregate of 777,471 shares of Company common stock for an aggregate of 388,735 unregistered shares of Common Stock.

On May 27, 2014 the Company entered into agreements with certain warrant holders to redeem “2013 warrants” to purchase 333,235 shares of Company common stock, in consideration for approximately $600 payable in cash ($1.80 per Warrant).

In May 2014, certain holders of 2013 Warrants which did not participate in the redemption and whose 2013 Warrants will therefore remained outstanding waived the anti-dilution provisions of their 2013 Warrants.

In July 2014, the Company agreed to adjust the exercise price of the remaining “2013 Warrants” to $0.525 per share.

On January 6, 2015, the remaining “2013 Warrants” holders that did not provide a waiver of their anti-dilution rights, exercised their warrants. Therefore, the liability related to the 2013 Warrants has been cancelled.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

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

At-the-market (ATM) Offerings (Cont.):

On June 13, 2014,March 6, 2020, the Company raisedentered into a new Distribution Agreement with Raymond James, pursuant to which the Company may sell from time to time, through the Agent, shares of Common Stock, having an aggregate offering price of up to $50,000,000 (the “March 6, 2020 ATM”). Sales under the March 6, 2020 ATM are made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and Raymond James. During the quarter ended March 31, 2020, the Company sold an aggregate of 336,487 shares of Common Stock pursuant to the March 6, 2020 ATM, at an average price of $5.23 per share, raising gross proceeds of $10.5 million throughapproximately $1.76 million.

The Company has no obligation under the March 6, 2020 ATM to sell any shares, and may at any time suspend sales or terminate the March 6, 2020 ATM in accordance with its terms. Raymond James is entitled under each ATM to a private placementfixed commission of 3.0% of the aggregate gross proceeds from the any shares sold. Shares sold under the ATMs are issued pursuant to the Company’s Common Stockexisting Shelf Registration Statement, and warrants purchase Common Stock. Thethe Prospectus Supplement to the Registration Statements filed June 11, 2019 and March 6, 2020 respectively.

Registered Direct Offering:

On March 6, 2020, the Company issued 2.8entered into and closed a $10.0 million registered direct offering of 1,250,000 shares of Common Stock at a price per share of $3.75 and three year warrantspurchase price equal to $8.00. The purchaser also received a three-year warrant to purchase up to 2.8 million250,000 shares of Common Stock at anany exercise price of $5.22$15.00 per share.

Pursuant to a Warrant Exercise Agreement, dated January 8, 2015, holders of the Company’s warrants (issued in June 2014) to purchase an aggregate of 2,546,667 shares of the Company’s Common Stock at an exercise price of $5.22 per share, agreed to exercise their 2014 Warrants in full and the Company agreed to issue new warrants to the holders to purchase up to an aggregate of approximately 3.8 million unregistered shares of Common Stock at an exercise price of $6.50 per share. The $6.50 warrants expire in June 2018. Gross proceeds from the exercise of the warrants was approximately $13.3 million. In connection with the Exercise Agreement, the Company agreed to pay to the Placement Agency a cash fee equal to 6.0% of the Exercise Proceeds, as well as fees and expenses of the Placement Agency of $20. In addition, the Company issued the Placement Agency a warrant to purchase 38,000 shares of Common Stock upon substantially the same terms as the New Warrants. Net of fees and related expenses the proceeds from the warrant exercise amounted to approximately $12.4 million.

Since its inception and as of a quarter ended March 31, 2020 the Company has raised approximately $46.6M, net$94 million, gross in cash in consideration for issuances of common stockCommon Stock and warrants in private placements and public offerings as well as proceeds from warrants exercises.

On November 25, 2004,

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Company's stockholdersInterim Condensed Consolidated Financial Statements

NOTE 7 - STOCK CAPITAL (Cont.):

Stock Plans:

As of March 31, 2020, the Company had outstanding awards for stock options under four stockholder approved plans: (i) the 2004 Global Stock Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) and on March 28, 2005, the Company's stockholders approved(the “2004 Global Plan”) (ii) the 2005 U.S. Stock Option and Incentive Plan (the “2005 U.S. Plan,” and together with the reservation of 609,564 shares of Common Stock for issuance in2004 Global Plan, the aggregate under these stock plans.

In June 2008, June 2011 and in June 2012, the Company's stockholders approved increases in the number of shares of common stock available for issuance under these stock option plans by 333,333, 333,333 and 600,000 shares, respectively

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 expired on November 25, 2014 and March 28, 2015, respectively.

On August 14, 2014, the Company's stockholders approved“Prior Plans”); (iii) the 2014 Global Share Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) (the “2014 Global Plan”); and (iv) the 2014 Stock Incentive Plan.Plan (the “2014 U.S. Plan” and together with the 2014 Global Plan, the “2014 Plans”).

A total 600,000The 2004 Global Plan and 2005 U.S. Plan expired on November 25, 2014 and March 28, 2015, respectively. Grants that were made under the Prior Plans remain outstanding pursuant to their terms. The 2014 Plans were approved by the stockholders on August 14, 2014 (at which time the Company ceased to issue awards under each of the 2005 U.S. Plan and 2004 Global Plan) and amended on June 21, 2016 and November 29, 2018. Unless otherwise stated, option grants prior to August 14, 2014 were made pursuant to the Company’s Prior Plans, and grants issued on or after August 14, 2014 were made pursuant to the Company’s 2014 Plans, and expire on the tenth anniversary of the grant date. The 2014 Plans have a shared pool of 4,000,000 shares of Common Stock were reservedavailable for issuance in the aggregate under these stock plans.issuance.

On June 21, 2016 the Company’s stockholders approved an amendment to the Plans which increased the shared poolAs of March 31, 2020, 1,623,067 shares of common stockwere available for issuancefuture issuances under the Plans by 1,600,000, from 600,000 to 2,200,000.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

2014 Plans. The exercise price of the options granted under the plans2014 Plans may not be less than the nominal value of the shares into which such options are exercised. Any options under the 2014 Plans that are canceled or forfeited before expiration become available for future grants.

On December 16, 2010, the Company granted to two of its directors fully vested options to purchase an aggregate of 26,667 shares of Common Stock at an exercise price of $2.25 per share.

On August 22, 2011, the Company entered into an agreement one of its directors pursuant to which the Company granted the director 61,558 restricted shares of Common Stock The Governance, Nominating and Compensation Committee (the “GNC Committee”) of the Company. The shares vested through August 22, 2014. In addition, the Company is paying the director $15 per quarter his services. On May 3, 2015 the Company granted to the director 60,000 sharesBoard of restricted Common Stock. The shares were vested in three installments through August 22, 2017.

On August 1, 2012, the Company granted to three of its directors options to purchase an aggregate of 30,667 shares of Common StockDirectors of the Company at $2.25 per share.administers the Company’s stock incentive compensation and equity-based plans.

On April 19, 2013, the Company grantedShare-based compensation to three of its directors optionsemployees and to purchase an aggregate of 30,667 shares of Common Stock of the Company at $2.25 per share. In addition the Company issued to two of its directors and four of its Advisory Board members a total of 50,667 restricted shares of Common Stock. The Options and restricted shares vested over 12 months.directors:

Employees:

On June 6, 2014, the Company granted its Chief Operating Officer a fully vested option to purchase 33,333 shares ofChaim Lebovits, the Company’s common stock. The exercise price of the grant was $2.70 per share. 

On June 9, 2014, the Company’s former Chief Executive Officer (i) was granted a stock option under the 2014 Global Plan on September 28, 2015 for the purchase of 380,000up to 369,619 shares of the Company’s commonCommon Stock at a per share exercise price of $2.45, which grant is fully vested and exercisable and shall be exercisable for a period of two years after termination of employment; (ii) received on July 26, 2017, July 26, 2018, July 26, 2019, and is entitled to receive on each anniversary thereafter (provided he remains Chief Executive Officer), a grant of 31,185 shares of restricted stock, each of which vests as to twenty-five percent (25%) of the award on the first, second, third and fourth anniversary of the date of grant and is subject to accelerated vesting over four years,upon a Change of Control (as defined in the Lebovits employment agreement) of the Company; and (iii) was granted on July 26, 2017 a fully vested and exercisable option to purchase up to 41,580 shares of Common Stock, with an exercise price per share of $4.5 per share.On November 10, 2015$4.81. The option was fully-vested and exercisable until the 2nd anniversary of the date of grant, when it expired unexercised.

Dr. Ralph Kern, President and Chief Medical Officer of the Company, received on March 6, 2017, March 6, 2018, March 6, 2019 and March 6, 2020, and is entitled to receive on each anniversary thereafter (provided he remains employed by the former CEO agreed that the unvested portionCompany), a grant of 35,885 shares of restricted stock, each of which vests as to twenty-five percent (25%) of the option as of October 30, 2015 (to purchase 253,333 shares) would be forfeitedaward on the first, second, third and that the vested potionfourth anniversary of the option (to purchase 126,667 shares) would terminate on September 30, 2016.date of grant and is subject to accelerated vesting upon a Change of Control (as defined in the agreement) of the Company.

On August 15,March 6, 2017, Dr. Kern received an option under the 2014 the Company issued to two of its directors and four of its Advisory Board members an aggregate of 50,667 restricted shares of Common Stock. The shares vested over 12 months.

On October 31, 2014, the Company granted to four of its directors optionsU.S. Plan to purchase an aggregate of 70,666up to 47,847 shares of Common Stock with an exercise price per share of $4.18. The option was fully vested and exercisable until the 2nd anniversary of the Company, at $0.75 per share. The options vest over 12 months.

On June 1, 2015, the Company granted to a director fully vested options to purchase an aggregatedate of 6,667 shares of Common Stock of the Company, at $0.75 per share.grant, when it expired unexercised.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 7 - STOCK CAPITAL (Cont.):

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

Employees (Cont.):

On July 30, 2015March 9, 2020, Dr. Kern received an option under the 2014 U.S. Plan to purchase up to 80,000 shares of Common Stock with an exercise price per share of $7.33. The option becomes vested and exercisable as to 25% of the number of shares on each of the first four anniversaries of the grant date until fully vested and exercisable on the fourth anniversary of the grant date. Notwithstanding the foregoing, immediately prior to a Change of Control (as defined in Dr. Kern’s employment agreement with the Company) any outstanding unvested Shares shall vest and become exercisable in full.

Uri Yablonka, the Company’s newly appointedExecutive Vice President, Chief Business Officer and director is granted a stock option for the purchase of up to 13,333 shares of Common Stock on the first business day after each annual meeting of stockholders (or special meeting in lieu thereof) of the Company (including on November 10, 2017, November 30, 2018 and December 12, 2019), each with an exercise price per share of $0.75, and each of which vests and becomes exercisable in 12 monthly installments. The Company also granted Mr. Yablonka 5,543 shares of restricted Common Stock on July 13, 2017.

On November 20, 2017, the Company granted to Eyal Rubin, the Company’s Chief Financial Officer, was25,000 shares of restricted Common Stock, which fully vested on April 1, 2018. On November 20, 2017 the Company also granted to Mr. Rubin an option to purchase 165,000up to 93,686 shares of Common Stock, at an exercise price per share equal to $4.30 per share, which shall vest and become exercisable as to 25% of the shares underlying the Option on each of the first, second, third and fourth anniversary of the date of grant, subject to accelerated vesting upon a Change of Control of the Company or a Material Secondary Public Offering of the Company (each as defined in Mr. Rubin’s employment agreement). Mr. Rubin resigned effective September 18, 2019 and all unvested and unexercised shares were forfeited in accordance with the 2014 Global Plan.

On August 28, 2018, the Company granted Arturo Araya, Chief Commercial Officer of the Company an option to purchase 200,000 shares of Common Stock, at an exercise price of $3.17$3.98 per share. The option would vest over 3 years. Effective December 1, 2015 the Company and the Chief Financial Officer agreed to amend the option agreement. Pursuant to the amendment, 82,500 shares were cancelled. The 82,500 remaining shares continued to vest and become exercisable in accordance with the terms25% of the grant: 20,625 shares vested and became exercisable on July 30, 2016 and 2.08333% of the 82,500 shares were scheduled togrant shall vest and become exercisable on each monthly anniversary date starting on August 30, 2016 throughof the first, second, third and fourth anniversaryanniversaries of the grant so thatdate and subject to accelerated vesting upon a Change of Control (as defined in the 82,500agreement). On August 28, 2018, Mr. Araya resigned from the GNC Committee, and the restricted stock previously granted to him in connection with his service on the Board and the GNC Committee ceased vesting and the unvested shares would become fully vested and exercisable on July 30, 2019. were forfeited.

On November 9, 2016,September 6, 2019, the Company’sCompany granted Preetam Shah, Executive Vice President, Chief Financial Officer notifiedand Treasurer of the Company, that he was terminating his part time employment with the Company effective at the end of business on November 14, 2016. The option ceased to vest on November 14, 2016 and the right to exercise the option was terminated February 14, 2017.

On August 27, 2015 the Company granted to four of its seven directorsstock options (i) to purchase an aggregate of 70,665up to 100,000 shares of Common Stock, at an exercise price of $0.75$3.96 per share, and granted to two of its directors an aggregate of 17,332 restricted shares of Common Stock. The options and restricted shares of Common Stock vested over 12 months until fully vested on August 27, 2016.

On September 28, 2015 the Company granted to its newly appointed Chief Executive Officer an option(ii) to purchase 369,619up to 100,000 shares of Common Stock at an exercise price of $2.45per share equal to $6.00 per share. TheEach option vested over 12 months until fully vested on August 28, 2016.

On July 14, 2016 the Company granted to four of its seven directors options to purchase an aggregate of 70,665 shares of Common Stock at an exercise price of $0.75 per share,shall vest and on September 26, 2016 granted 8,666 restricted share of Common Stock to one director and on March 28, 2017 granted 8,666 restricted shares of Common Stock to another director. The options and restricted shares of Common Stock vested over 12 months until fully vested on June 22, 2017.

On February 26, 2017 the Company granted a stock option to a director to purchase up to 6,667 shares of Common Stock at an exercise price of $0.75 per share. The option was fully vested andbecome exercisable on the date of grant.

On February 26, 2017 the Company granted a director 3,012 shares of restricted common stock. The grant vests in 12 consecutive, equal monthly installments commencing on the one month anniversaryas follows: 25% of the date of grant, until fully vestedshares underlying the option shall vest and become exercisable on the first anniversary of the date of grant, provided grantee remainsand the remaining shares underlying the option shall vest and become exercisable in equal quarterly installments thereafter, until fully vested and exercisable on the fourth anniversary of the date of grant, and is subject to accelerated vesting upon a directorChange of Control (as defined in Dr. Shah’s employment agreement) of the Company.

On September 6, 2019, the Company granted Dr. Shah 25,000 shares of restricted common stock of the Company, which shall vest as to 100% of the award on the one year anniversary of the grant date, and is subject to accelerated vesting upon a Change of Control (as defined in Dr. Shah’s employment agreement) of the Company.

The Company granted Mary Kay Turner, an employee, 9,924 shares of restricted Common Stock on August 17, 2017, 11,198 shares of restricted Common Stock on August 1, 2018 and 11,533 on August 1, 2019, each such vesting date.

of which vests as to 25% of the grant yearly over the course of four (4) years.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

On March 6, 2017, the Company granted to its newly appointed Chief Operating Officer 35,885 shares of restricted common stock, which vests as to twenty-five percent (25%) of the award on each of the first, second, third and fourth anniversary of the date of grant, provided grantee remains continuously employed by the Company from the date of grant through each applicable vesting date, and is subject to accelerated vesting upon a Change of Control (as defined in an agreement with grantee) of the Company. In the event of grantee’s termination of employment, any portion of the grant that is not yet vested (after taking into account any accelerated vesting) shall automatically be immediately forfeited to the Company, without the payment of any consideration to grantee.

On March 6, 2017,July 9, 2018, the Company granted to its newly appointed Chief Operating OfficerSusan Ward, an employee, an option to purchase up to 47,847150,000 shares of Common Stock at an exercise price of $4.21 per share, of $4.18. The option is fully vestedwhich vests and becomes exercisable as to 20% of the date of grant and shall remain exercisable until the 2nd anniversary of the date of grant, regardless of whether grantee remains employed by the Company.

On July 13, 2017, the Company granted a stock option to a director to purchase up to 12,000 shares of Common Stock of the Company.  The option is fully vested and exercisable on the date of grant.

On July 13, 2017, the Company granted an aggregate of 16,629 shares of Common Stock of the Company to three officers of the Company.

On July 26, 2017, the Company granted to its Chief Executive Officer 31,185 shares of restricted common stock, which vests as to twenty-five percent (25%) of the award on each of the first, second, third, fourth and fourth anniversaryfifth anniversaries of the date of grant, provided grantee remains continuously employed by the Company from the date of grant through each applicable vesting date, and is subject to accelerated vesting upon a Change of Control (as defined in an agreement with grantee) of the Company. In the event of grantee’s termination of employment, any portion of the grant that is not yet vested (after taking into account any accelerated vesting) shall automatically be immediately forfeited to the Company, without the payment of any consideration to grantee.grant.

On July 26, 2017,Directors:

From 2005 through 2015, the Company granted to its Chief Executive Officer an optiondirectors options to purchase up to 41,580an aggregate of 402,778 shares of Common Stock at an average exercise price of $1.34 per share of $4.81. The option is fully vested and exercisable as of the date of grant and shall remain exercisable until the 2nd anniversary of the date of grant, regardless of whether grantee remains employed by the Company.share.

On August 17,The Company’s Second Amended and Restated Director Compensation Plan was approved in July 9, 2014 and amended on April 29, 2015, February 26, 2017 and July 13, 2017 (as amended, the “Director Compensation Plan”). The Director Compensation Plan governs Company compensation of eligible non-employee director of the Company, except that certain non-employee directors have individualized compensation and are not entitled receive annual director awards under the Director Compensation Plan, but are entitled to committee compensation under the Director Compensation Plan in the event that they qualify for and serve as a member of any committee of the Board. The Director Compensation Plan also determines the annual awards to be granted to qualified directors for their services in future periods, which annual awards have had the same terms since 2014, as further detailed in the Director Compensation Plan.

During the 3 months ended March 31, 2020, the following grants were made under the 2014 Plans to eligible directors:

Restricted Stock:

The Company awards stock and restricted stock to certain employees, officers, directors, and/or service providers. The restricted stock vests in accordance with such conditions and restrictions determined by the GNC Committee. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a newly appointed VPspecified restricted period. The purchase price (if any) of Patient Advocacy and Government Affairs 9,924 shares of restricted common stock which vests on each of the first, second, third and fourth anniversary of the date of grant, provided that grantee remains continuously employedis determined by the Company fromGNC Committee. If the dateperformance goals and other restrictions are not attained, the grantee will automatically forfeit their unvested awards of restricted stock to the Company. Compensation expense for restricted stock is based on fair market value at the grant through each applicable vesting date.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 7 - STOCK CAPITAL (Cont.):

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

Compensation expense recorded by the Company accountsin respect of its stock and restricted stock awards to certain employees, officers, directors, and/or service providers for shares and warrant grants issuedthe three months ended March 31, 2020 amounted to non-employees using the guidance of ASC 505-50, "Equity-Based Payments to Non-Employees" (EITTF 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.$122.

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

* Represents Employee Stock Options only (not including RSUs).

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 7 - STOCK CAPITAL (Cont.):

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

Directors (Cont.):

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s shares on September 30, 2017 and the exercise price,March 31, 2020, multiplied by the number of in-the-money options on those dates) that would have been received by the option holders had all option holders exercised their options on those dates.

Compensation expense recorded by the Company in respect of its stock-based employeeemployees and directors compensation awards in accordance with ASC 718-10 for the ninethree months ended September 30, 2017March 31, 2020 and 20162019 amounted to $416$390 and $667,$312, respectively.

Total Stock-Based Compensation Expense

The Company accounts for shares and warrant grants issued to non-employees using the guidance of ASC 505-50, "Equity-Based Payments to Non-Employees" (EITTF 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 SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

The fair value for the warrants to service providers was estimated on the measurement date determined using a Black-Scholes option pricing model, with the following weighted-average assumptions for the year ended December 31, 2010; weighted average volatility of 140%, risk free interest rates of 2.39%-3.14%, dividend yields of 0% and a weighted average life of the options of 5-5.5 and 1-9 years. There were no grants to service providers since 2010.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

On December 30, 2009, the Company issued to Ramot 74,667 shares of Common Stock (See Note 3).

On December 31, 2011, the Company issued to Hadasit warrants to purchase up to 100,000 restricted shares of Common Stock at an exercise price of $0.015 per share, exercisable for a period of 5 years.  The warrants vested over the course of the trials and were exercised in 2015.

On January 16, 2013, the Company granted an aggregate of 14,400 shares of Common Stock of the Company to two consultants, for services rendered through December 31, 2012. Related compensation expense in the amount of $54 was recorded as research and development expense.

On February 4, 2013, the Company issued 8,408 shares of Common Stock to an investor, according to a settlement agreement, for the correction of the conversion rate of a $200 convertible loan. The convertible loan was issued in 2006 and converted in 2010.

On March 11, 2013, the Company granted to its legal advisor 12,913 shares of Common Stock for 2013 legal services. The related compensation expense in the amount of $44.5 was recorded as general and administrative expense.

On November 13, 2013, the Company approved a grant of 30,000 shares of Common Stock to the Consultants, for services rendered during January 1, 2013 through September 30, 2013 (the “2013 Shares”). On March 24, 2014, the Company approved grants of an aggregate of 6,000 shares of Common Stock to the Consultants for services rendered in 2014, and issued such shares together with the 2013 Shares.

On March 11, 2013, the Company granted to two of its service providers an aggregate of 26,667 shares of Common Stock. The shares were issued as compensation for public relations services. The related compensation expense in the amount of $92 was recorded as general and administrative expense.

On July 28, 2014, the Company granted to its legal advisor 10,752 shares of Common Stock for 2014 legal services. The related compensation expense in the amount of $50 was recorded as general and administrative expense.

On April 29, 2015, the Company approved grants of an aggregate of 27,411 shares of Common Stock to the Consultants for services rendered in 2014. The related compensation expense was recorded as research and development expense.

On January 2, 2016, the Company granted to its legal advisor 10,752 shares of Common Stock for 2015 legal services. The related compensation expense of $31 was recorded as general and administrative expense.

On July 14, 2016, the Company granted of an aggregate of 25,281 shares of Common Stock to two consultants for services rendered in 2015. The related compensation expense was recorded as research and development expense.

On August 17, 2017, the Company granted to a consultant 4,327 fully vested shares of restricted common stock. The restriction expires in eight (8) equal consecutive quarterly installments (starting November 17, 2017) until fully vested on the second anniversary of the date of grant.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

The 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:

NOTE 8 - SUBSEQUENT EVENTS

On April 6, 2020, Mr. Sankesh Abbhi received 4,657 shares of restricted Common Stock under the 2014 Plans, which shall vest in 12 monthly installments, for his service as a director.

On April 6, 2020, Dr. Jacob Frankel received stock options under the 2014 Plans for the purchase of up to 50,000 shares of Common Stock each with an exercise price per share of $0.75, and each of which vests and becomes exercisable in 12 monthly installments, for his service as director.

On April 7, 2020, the Company granted Dr. David Setboun 50,000 shares of restricted Common Stock under the 2014 Plans, which shall vest as to 100% of the award on the one year anniversary of the grant date, and is subject to accelerated vesting upon a change of control of the Company. On April 7, 2020, the Company also grantedMr. Setboun a one-time issuance of performance based restricted stock units (the “RSU”) with the following terms: upon the occurrence of specified milestones Mr. Setboun shall receive, within 10 business days, 250,000 shares of restricted Common Stock which shall vest immediately as to 100% of the award. The RSU is not subject to acceleration upon change in control. The milestone for the RSU is as follows: the Company had entered into a definitive commercialization agreement - prior to its phase 3 ALS trial data unblinding for its lead investigational product - with a third party that is not an affiliate or subsidiary of the Company, with respect to the Company’s primary targeted indication – Amyotrophic Lateral Sclerosis.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 8 - SUBSEQUENT EVENTS

In December 2019, a novel strain of coronavirus (“COVID-19”), surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States and Israel, where the Company conducts its operations, as well as its clinical trials for NurOwn®. In response to the spread of COVID-19, to ensure the safety of employees and continuity of business operations, the Company closed its offices, with its administrative employees continuing their work remotely and limited the number of staff in any given research and development laboratory. The Company’s research and development laboratory in Israel and manufacturing sites in the U.S. remain open.

As of the date of this report, the Company’s business operations and clinical trials have continued with delays in the pace of enrollment in its Phase 2 PMS clinical trial due to site access restrictions related to the global COVID-19 pandemic. Scheduled March and April 2020 new patient enrollments were deferred to May 2020 due to site closures related to COVID-19, when some of affected healthcare sites anticipate their access restrictions will be mitigated. Enrollment will proceed in 2020 subject to any site access restrictions related to COVID-19.

The Phase 3 ALS clinical trial continues to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19. Non-treatment study visits are now performed by telephone.

Because of the COVID-19 outbreak, the Company may, in the future, experience disruptions that could severely impact its business, including clinical trial activities; participant enrollment; or any currently unforeseen delays in completion of study timelines. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. The Company's management team is actively monitoring this situation and the possible effects on the financial condition, liquidity, operations, suppliers, industry, and workforce.

In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events through the date the condensed consolidated financial statements were issued. The Company concluded that no other subsequent events have occurred that would require recognition or disclosure in the condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains numerous statements, descriptions, forecasts and projections, regarding BrainstormBrainStorm Cell Therapeutics Inc. (together with its consolidated subsidiaries, the “Company,” “Brainstorm,“BrainStorm,” “we,” “us” or “our”) and its potential future business operations and performance, including financial results for the most recent fiscal quarter, statements regarding the market potential for treatment of neurodegenerative disorders such as ALS, the sufficiency of our existing capital resources for continuing operations in 20172020 and beyond, the safety and clinical effectiveness of our NurOwn® technology, our clinical trials of NurOwn® and its related clinical development, and our ability to develop collaborations and partnerships to support our business plan. In some cases you can identify such “forward-looking statements” by the use of words like “may,” “will,” “should,” “could,” “expects,” “hopes,” “anticipates,” “believes,” “intends,” “plans,” “projects,” “targets,” “goals,” “estimates,” “predicts,” “likely,” “potential,” or “continue” or the negative of any of these terms or similar words. These statements, descriptions, forecasts and projections constitute “forward-looking statements,” and as such involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance and achievements to be materially different from any results, levels of activity, performance and achievements expressed or implied by any such “forward-looking statements.” These risks and uncertainties include, but are not limited to our need to raise additional capital, our ability to continue as a going concern, regulatory approval of our NurOwn® treatment candidate, the success of our product development programs and research, regulatory and personnel issues, development of a global market for our services, the ability to secure and maintain research institutions to conduct our clinical trials, the ability to generate significant revenue, the ability of our NurOwn® treatment candidate to achieve broad acceptance as a treatment option for ALS or other neurodegenerative diseases, our ability to manufacture and commercialize our NurOwn® treatment candidate, obtaining patents that provide meaningful protection, competition and market developments, our ability to protect our intellectual property from infringement by third parties, heath reform legislation, demand for our services, currency exchange rates and product liability claims and litigation, the impact on BrainStorm of the COVID-19 pandemic, and other factors described under “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2016.2019. These “forward-looking statements” are based on certain assumptions that we have made as of the date hereof. To the extent these assumptions are not valid, the associated “forward-looking statements” and projections will not be correct. Although we believe that the expectations reflected in these “forward-looking statements” are reasonable, we cannot guarantee any future results, levels of activity, performance, or achievements. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change, we may not inform you if they do and we undertake no obligation to do so, except as required by applicable securities laws and regulations. We caution investors that our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business, prospective investors should carefully consider the information set forth under the caption “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2016,2019, in addition to the other information set forth herein and elsewhere in our other public filings with the Securities and Exchange Commission.Commission (“SEC”).

Company Overview  

Brainstorm Cell Therapeutics Inc. is an integrated biotechnology company actively engaged

The Outbreak of the novel strain of coronavirus, SARS-CoV-2 (COVID-19) disease has currently impacted and may continue to adversely impact our business, including our preclinical studies and clinical trials. In December 2019, a novel strain of coronavirus, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the developmentUnited States and commercialization of innovative adult stem cell therapiesIsrael, where the Company conducts its operations, as well as its clinical trials for the treatment of debilitating neurodegenerative disorders that have no or limited treatment options, thus representing a unique opportunity to address unmet medical needs. These include Amyotrophic Lateral Sclerosis (“ALS”, also known as Motor Neuron Disease (MND) or Lou Gehrig’s disease), Multiple Sclerosis (“MS”), and Parkinson’s disease (“PD”), among others. NurOwn® is our proprietary process for the propagation of adult bone marrow-derived Mesenchymal Stem Cells (“MSC”), their differentiation into neurotrophic factor (“NTF”) secreting cells (“MSC-NTF”), and transplantation at, or close. In response to the sitespread of damage.

EvidenceCOVID-19 and to date from published animalensure safety of employees and human studies suggests that NurOwnÒ offerscontinuity of business operations, we closed our offices, with our administrative employees continuing their work remotely and limited the potential for more effective treatmentnumber of neurodegenerative diseases, relative to existing therapies, through unique neuroprotectivestaff in any given research and immunomodulatory effects. Groundbreaking ALS CSF biomarker work has demonstrated a strongly correlated increase in neurotrophic factorsdevelopment laboratory. Our research and a reduction in inflammatory biomarkers (MCP-1 and SDF-1) in NurOwnÒ-treated, and not in placebo treated, participants. This is a clear indicator of the mechanism by which this technology acts in ALS, and in related neurodegenerative diseases.

Our core technology was invented by Professor (Prof.) Daniel Offen of the Felsenstein Medical Research Center, Tel Aviv University, and the late Prof. Eldad Melamed, former head of Neurology of the Rabin Medical Center and former member of the Scientific Committee of the Michael J. Fox Foundation for Parkinson’s Research. Our wholly-owned Israeli subsidiary, Brainstorm Cell Therapeutics Ltd. (“Israeli Subsidiary”), holds rights to commercialize the technology through a licensing agreement with Ramot (“Ramot”), the technology transfer company of Tel Aviv University, Israel. We currently employ 19 employeesdevelopment laboratory in Israel and 3manufacturing sites in U.S. remain open.

As of the date of this report, our business operations andclinical trials have continued with delays in the United States.pace of enrollment in our Phase 2 PMS clinical trial due to site access restrictions related to the global COVID-19 pandemic. Scheduled March and April 2020 new patient enrollments were deferred to May 2020 due to site closures related to COVID-19, when some of affected healthcare sites anticipate their access restrictions will be mitigated. Enrollment will proceed in 2020 subject to any site access restrictions related to COVID-19. The Phase 3 ALS clinical trial continues to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19. Non-treatment study visits are now performed by telephone.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. Our management team is actively monitoring this situation and the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce. For additional information on risks posed by the COVID-19 pandemic, please see Part II, Item 1A – Risk Factors – Risks Related to the COVID-19 Pandemic.

Recent Highlights

Our

NurOwn®Proprietary Technology

Facilitated by NurOwn® technology is based on an innovative manufacturing protocol, which induces the differentiated MSC-NTFdifferentiation of purified and expanded bone marrow-derived mesenchymal stem cells are capable(“MSC”) and consistently generates cells that release high levels of releasing several highly disease relevantmultiple neurotrophic factors including Glial-derived neurotrophic factor (“GDNF”), Brain-derived neurotrophic factor (“BDNF”), Vascular endothelial growth factor (“VEGF”)MSC-NTF” cells) to modulate neuroinflammatory and Hepatocyte growth factor (“HGF”), allneurodegenerative disease processes, promote neuronal survival and improve neurological function. These factors are known to be critical for the growth, survival and differentiation of developing neurons.neurons, including: glial-derived neurotrophic factor (“GDNF”); brain-derived neurotrophic factor (“BDNF”); vascular endothelial growth factor (“VEGF”); and hepatocyte growth factor (“HGF”), among others. GDNF is one of the most potent survival factors involved in the protection and survival offor peripheral neurons.motorneurons. VEGF and HGF have been reported to havedemonstrated important protectiveneuroprotective effects on neuronsin ALS and other non-neuronal glial cells inneurodegenerative diseases. Neuroinflammation is a prominent and early feature of ALS and other neurodegenerative diseases, as well as other neurodegenerative diseases. The effects of neurotrophic factors on neurons may include:

In addition to the consistent and important release of neurotrophic factors, NurOwnÒ demonstrates consistentin vitromodification of the immune response (immunomodulation) andin vivo modulation of CSF biomarkers. Neuroinflammation is an important cause of disease progression in neurodegenerative diseases, including ALS. The proprietary NurOwnÒ process results in significant measurable differences from undifferentiated MSCs, including: enhanced release of neurotrophic factors; release of neurotrophic factors that are very low or not expressed by MSCs; and a unique micro-RNA profile that may regulate growth and development of neurons (neurogenesis), VEGF and neuroinflammation. In preclinical studies, NurOwnÒ was found to be more effective than MSC in treating Autism, Parkinson’s disease, Huntington’s disease and multiple sclerosis. The combination of enhanced NTF release and neuromodulation may be an optimal approach to restore function and reduce ongoing CNS tissue damage in neurodegenerative disease.Progressive MS.

NurOwnÒ treatment isNurOwn® manufacturing involves a multi-step process (see table below) beginning withthat includes: harvesting ofand isolating undifferentiated stem cells from the patient’spatient's own bone marrow; processing of cells at the manufacturing site; cryopreservation of MSC to enable multiple treatments from a single bone marrow sample; and concluding with transplantationintrathecal (“IT”) injection of the resulting differentiated, neurotrophic factor-secreting mesenchymal stemMSC-NTF cells (MSC-NTF) back into the same patient – intrathecally (injection into the cerebrospinal fluid) by standard lumbar puncture and/or intramuscularly.puncture. This uniqueadministration procedure does not require hospitalization and has been shown to be safe and well tolerated in multiple CNS clinical trials to date. The ongoing NurOwn® U.S. Phase 3 ALS study is evaluating the therapeutic potential of repeated dosing (three doses at bi-monthly intervals).

The proprietary technology and manufacturing processing of NurOwn® (MSC-NTF cells) for clinical use is conducted in full compliance with current Good Manufacturing Practice (“cGMP”). The NurOwn® proprietary technology is the first-of-its-kindfully owned to or developed by BrainStorm Cell Therapeutics Ltd., our wholly owned subsidiary (the “Israeli Subsidiary”). All granted patents related to NurOwn® (MSC-NTF cells) manufacturing process are fully assigned to or owned by BrainStorm Cell Therapeutics Ltd. (see Intellectual Property section for the treatment of neurodegenerative diseases.details). 

The NurOwn® Transplantation Process

Our proprietary technology process is conducted in full compliance with current Good Manufacturing Practice (“cGMP”). It is licensedDifferentiation before Transplantation

The ability to induce autologous adult mesenchymal stem cells into differentiated MSC-NTF cells makes NurOwn® uniquely suited for the treatment of neurodegenerative diseases.

The specialized MSC-NTF cells secrete multiple neurotrophic factors and developed by our Israeli Subsidiary.immunomodulatory cytokines that may result in:

Advances of NurOwnÒ Beyond Current Therapies- Patient BenefitsAutologous (Self-transplantation)

Given thatThe NurOwn®’s approach involves transplantation of technology platform is autologous, using the patient’s own bone-marrow derived stem cells derived from the same patient (autologous),for “self-transplantation.” In autologous transplantation, there is no introduction of unrelated donor antigens that may lead to alloimmunity, no risk of rejection and no need for treatment with immunosuppressive agents, which can cause severe and/or long-term side effects. In addition, the use of adult stem cells precludes the controversyis free of several ethical concerns associated with the use of embryonicembryonic-derived stem cells in some countries.

MSC can be cryopreserved and, as required, can be subsequently differentiated into NurOwn®, and demonstrate product characteristics like NurOwn^® cells derived from fresh MSC of the same patient/donor. This will allow the Company to provide repeated doses of autologous NurOwn® from a single bone marrow aspirate in its upcoming multi-dose clinical trial and will avoid the need for patients to undergo repeated bone marrow aspiration.

The ALS Clinical Program

NurOwn® is currently in a Phase 1/2 and Phase 2a studies

The3 late stage clinical development program for NurOwn® in ALSthe treatment of ALS. It has been granted Fast Track designation by the U.S. Food and Drug Administration (“FDA”) for this indication, and has been granted Orphan Drug Status, in both the United StatesU.S. and in Europe.

Europe, which provides the potential for an extended period of exclusivity.

Phase 1/2 ALS Open Label Trials

We have completed two early stage Phase 1/2 and 2 open-label clinical trials of NurOwn® in patients with ALS at the Hadassah Medical Center (“Hadassah”), with Prof. Dimitrios Karussis in Jerusalem, Israel, as Principal Investigator (PI):well as a Phase 2 double-blind, placebo-controlled, multicenter clinical trial at three prestigious U.S. Medical centers - the Massachusetts General Hospital (MGH) in Boston, Massachusetts Memorial Hospital in Worcester, Massachusetts, and the Mayo Clinic in Rochester, Minnesota - all highly experienced in the management and investigation of ALS.

The first two open-label trials were approved by the Israeli Ministry of Health (“MoH”). The first-in-human trial, a Phase 1 safety and efficacy trial of NurOwn® administered either intramuscularly or intrathecally in 12 ALS patients, was initiated in June 2011. In the Phase 2 dose-escalating study, 14 ALS patients were administered NurOwn® by a combined route of intramuscular and intrathecal administration. These studies demonstrated the safety of NurOwn® by both routes of administration and showed preliminary signs of efficacy.

In January 2016, the Company announced the publication of a paper in the January 2016 edition of JAMA Neurology based on the results of the first in mantwo completed Phase 1/2 and Phase 2a studiesstudy and Phase 2 dose escalation study with NurOwn®open label trials were published in ALS. The data provide indication of clinically meaningful benefit as reflected byJAMA Neurology. This demonstrated a slower rate of ALS disease progression following NurOwnÒ treatment,MSC-NTF cell transplantation as measured by the ALS Functional Rating Score (“ALSFRS-R”), the gold standard for the evaluation of ALS functional status, and Forced Vital Capacity (“FVC”), a measure of pulmonary function, as well as positive trend on two ALS disease biomarkers, includingtrends in the rate of decline of muscle volume and electrical muscle function.the compound motor axon potential (“CMAPs”). This was the first published clinical data using autologous mesenchymal stem cells, induced under culture conditions to produce NTFs, with NurOwnÒ, or any treatment,the potential to achievedeliver a combined neuroprotective and immunomodulatory therapeutic effect in ALS and potentially modify the course of this disease.

In April 2016, the Company presented the combined results of the Phase 1/2 and Phase 2a NurOwn® clinical studies in ALS at the ISRASTEM 2016 and 6th Israel Stem Cell Society (ISCS) joint annual meeting which took place in Tel Aviv, Israel.Randomized Trial

The US Phase 2 Multicenter Double-Blind Placebo Controlled Clinical Study for ALS Patients

In December 2013, the Company submittedU.S. study was conducted under an FDA Investigational New Drug (“IND”) application to the FDA for NurOwn® in ALS, and on April 28, 2014, we initiated an FDA-approvedapplication. This randomized, double-blind, placebo controlledplacebo-controlled multi-center U.S. Phase 2 clinical trial evaluating NurOwn® in ALS patients. The trialpatients was conducted at three clinical sites: (i) the Massachusetts General Hospital (PIs - Drs. Merit Cudkowicz and James Berry)(MGH) in Boston, Massachusetts, at the University of(ii) Massachusetts Memorial Hospital (PI - Dr. Robert Brown) in Worcester, Massachusetts, and at(iii) the Mayo Clinic (PI - Drs. Anthony Windebank and Nathan Staff) in Rochester, Minnesota. For this study,trial, NurOwn® was manufactured at the Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute in Boston Massachusetts, and at the Human Cellular Therapy Lab at the Mayo Clinic. In thethis study, 48 patients were randomized 3:1 to receive NurOwn® or placebo.

In February 2015,Results of this Phase 2 Study were published in the peer reviewed Journal ‘Neurology’. The publication entitled NurOwn, Phase 2, Randomized, Clinical Trial in Patients With ALS: Safety, Clinical, and Biomarker Results was published in December 2019.

Key findings from the trial were as follows:

Phase 3 ALS Clinical Trial

Following successful completion of the Phase 2 study, the Company announcedis currently conducting a Phase 3 trial (a multi-dose double-blind, placebo-controlled, multicenter trial protocol) that has been designed to generate data to support a Biologic License Application (“BLA”) for NurOwn® in ALS. The clinical trial has completed enrolment of an enriched patient population of rapid progressors (~50% of ALS patients) based on superior outcomes observed in the Phase-2 pre-specified sub-group.

The primary clinical efficacy outcome measure is the ALSFRS-R score responder analysis, an outcome that evaluates the proportion of treated participants who achieve a prespecified level of improvement in the ALSFRS-R post-treatment slope. The Phase 3 trial expands biomarker evaluations to further understand their potential to predict ALS disease progression, treatment response and confirm the biology of NurOwn® in a larger study population. The study is being conducted at 6 leading U.S. medical centers, 3 of which participated in the prior Phase 2 study. Patient enrollment commenced in October 2017, at Massachusetts General Hospital followed by the other 5 study sites, including University of California Irvine Medical Center, University of Massachusetts Medical Center, Mayo Clinic in Rochester, Minnesota, the California Pacific Medical Center in San Francisco, and Cedars Sinai Medical Center in Los Angeles. All 6 sites are actively enrolling study participants. As of October 2019, the study is fully enrolled.

The independent Data Safety Monitoring Board (“DSMB”) for the multi-center U.S.study completed its pre-specified interim analysis of safety outcomes for the first 31 participants treated with NurOwn® in the Phase 2 clinical3 trial had reviewed thein ALS (NCT03280056) in August 2018. The DSMB indicated there were no significant safety data collected through a cutoff date in January 2015,concerns and did not find any significant lab abnormalities, adverse events or significant protocol deviationsrecommended that would be cause for concern and therefore approved continuation of the trial continue, as planned.planned without any modifications to the study protocol.

On August 11, 2015,The DSMB completed the Company announced that it had completed enrollment achieving the targetsecond pre-specified interim analysis of 48 subjects to be enrolled in its ongoing randomized, double-blind placebo-controlled Phase 2 clinical trial ofsafety outcomes for 106 participants treated with NurOwn® in ALS.the Phase 3 ALS trial on October 28, 2019. The Company further announced, in November 2015,DSMB indicated that the trial should continue without any modifications to the study protocol, and the DSMB review of the safety data collected through a cutoff date in October 2015 for the multi-center U.S. Phase 2 clinical trialchair indicated that 47 of the 48 patients enrolled in the study confirmed that they experienced no treatment-related serious adverse events (SAEs). Furthermore, the DSMB did not identify any significant adverse events, lab abnormalities or significant protocol deviations that would be cause for concern.safety concerns.

In July 2016, the Company announced topline data from the recently completed U.S. randomized, double-blind, placebo-controlledThe Phase 2 Study of NurOwn® in ALS which confirmed that the study achieved its primary objective, demonstrating that NurOwn® was safe and well tolerated. NurOwn® also achieved multiple secondary efficacy endpoints, showing clear evidence of a clinically meaningful benefit. Notably, response rates were higher for NurOwn®-treated subjects compared to placebo at all time points in the study out to 24 weeks.

In October 2016, some of the Company’s topline Phase 23 ALS clinical trial results were presentedcontinues to provide necessary treatments to study participants despite severe constraints in the affected healthcare institutions due to COVID-19.Non-treatment study visits are now performed by Dr. Robert Brown and Dr. James Berry,telephone. Top-line efficacy data is still expected in the fourth quarter of 2020. The study is registered at the 15th Annual Meeting of the Northeast ALS Consortium (NEALS)www.clinicaltrials.gov (ClinicalTrials.gov Identifier: NCT03280056).

In December 2016, theThe Company announced that data from the Company’s Phase 2 study of NurOwn® in ALS, would be highlighted in presentations at the 27th International Symposium on ALS/MND, being held December 7-9, 2016 in Dublin, Ireland. Lead investigator, Dr. James Berry, presented new data from the Phase 2 study demonstrating that in ALS patients treated with NurOwnÒ, CSF neurotrophic factors (VEGF, HGF and LIF) showedhas developed a statistically significant increase and correlated with a statistically significant decrease in CSF inflammatory markers (MCP-1 and SDF-1) two weeks post-transplantation compared to pre-transplantation. In addition, reductions in CSF inflammatory markers at two weeks post-transplantation correlated with improvements in ALSFRS-R slope at 12 weeks post-transplantation, consistent with the proposed mechanism of action of NurOwnÒ in ALS. Dr. Berry also presented the pre-specified responder analyses from the Phase 2 trial which examined percentage improvements in post treatment of Amyotrophic Lateral Sclerosis Functional Rating Scale (ALSFRS-R) slope compared to pre-treatment slope. These analyses showed that, in the NurOwn® treated group, a greater number of patients achieved the high threshold of 100% or greater improvement in the post-treatment vs. pre-treatment slope, compared with the placebo group. Responders were defined as those in whom disease symptoms were essentially halted for the period of the treatment effect or those who achieved a positive improvement on their ALSFRS-R score. Moreover, in the pre-specified subgroup that excluded subjects whose disease was progressing slowly, this effect was even more pronounced. Dr. Berry’s presentation was posted on the Company website.

In May 2017, the Company presented data from its Phase 2 clinical study of NurOwn® in ALS at the International Society for Cellular Therapy (ISCT) annual conference in London, England and at the World Advanced Therapy and Regenerative Medicine Congress in London, England.

Phase 3 Clinical Study for ALS Patients 

In October 2017, the Company announced that the first patients have been enrolled in the Phase 3 clinical trial of NurOwn® for the treatment of amyotrophic lateral sclerosis (ALS) at the Massachusetts General Hospital and UC Irvine Medical Center in California.  The trial is expected to enroll approximately 200 patients and will be conducted at six leading ALS clinical sites in the U.S.  The primary outcome measure will be the ALSFR-S score responder analysis.  The patient population will be optimized to include the pre-specified subgroups who demonstrated superior outcomes in the NurOwn® Phase 2 ALS clinical trial.  Top-line data are expected in 2019.

In January 2017, the Company announced that it had validated its cryopreservation process for NurOwn® in preparation for the upcoming Phase 3 clinical study in ALS. The validation involved a comparisonlong-term storage of MSC, that allows multiple doses of NurOwn® (MSC-NTF cells)to be created from a single bone marrow harvest procedure in the multi-dose clinical trial and to avoid the need for patients to undergo repeated bone marrow aspiration. A validation study was conducted in 2017 comparing NurOwn® derived from fresh mesenchymal stem cells (MSC)MSC to those derived from cryopreserved MSC. Company scientists were successful in showing that the MSC can be stored in the vapor phase of liquid nitrogen for prolonged periods of time, while maintaining their characteristics. The cryopreservedCryopreserved MSC can differentiateare capable of differentiating into NurOwn®, similar to the NurOwn^®NurOwn® derived from fresh MSC offrom the same patient/donor, prior to cryopreservation. This will allow the Company to provide repeated doses of autologous NurOwn® from a single bone marrow aspirate in its upcoming multi-dose clinical trial. Cryopreservation will avoid the need for patients to undergo repeated bone marrow aspirations.cryopreservation and maintain their key functional properties including immunomodulation and neurotrophic factor secretion.

In February 2017, the

The Company announced that it plans to contracthas contracted with City of Hope’sHope's Center for Biomedicine and Genetics to produce clinical supplies of NurOwn® adult stem cells for the company’s planned randomized, double-blind, multi-doseongoing Phase 3 clinical study in patients with ALS.study. City of Hope will support manufacturingis currently supporting the production of NurOwn® and placebo for allthe participants treated in the Phase 3 trial. The Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute (DFCI) in Boston has also been contracted to manufacture NurOwn® and placebo for Phase 3 ALS clinical study participants and commenced manufacturing in October 2018. As of March 2019, The DFCI core manufacturing facility is also supplying NurOwn for the Phase 2 PMS study.

Special meeting with FDA senior management

In July 2019, the BrainStorm management team was invited to participate in a special in-person, high-level meeting with the senior management of the FDA’s Drug and Biologics Centers and, ’I AM ALS’, a grassroots ALS advocacy group advocating for an ALS cure.

FDA’s Dr. Peter Marks, Director of the Center for Biologics Evaluation and Research (CBER) and Dr. Janet Woodcock Director of the Center for Drug Evaluation and Research (CDER) were in attendance with senior FDA staff. BrainStorm’s Phase 3 ALS principal Investigators Dr. Robert Brown (Massachusetts Memorial Hospital, Worcester, Massachusetts) and Dr. Merit Cudkowicz (Massachusetts General Hospital, Boston) joined by teleconference.

The meeting’s purpose was to discuss BrainStorm’s ongoing Phase 3 ALS clinical trial as well as efforts to speed treatment access to the ALS patient community. The meeting enabled an open and effective dialogue between the FDA and BrainStorm, setting the stage for future meetings to explore practical options to quickly bring our investigational treatment to those living with ALS.

On February 11, 2020, the Company announced that it recently held a high-level meeting with the U.S. medical centers participatingFood and Drug Administration (FDA) to discuss potential NurOwn® regulatory pathways for approval in ALS. In the planned meeting with senior Center for Biologics Evaluation and Research (CBER) leadership and several leading U.S. ALS experts, the FDA confirmed that the fully enrolled Phase 3 ALS trial is collecting relevant data critical to the assessment of NurOwn efficacy. The FDA indicated that they would look at the "totality of the evidence" in the expected Phase 3 clinical trial data. Furthermore, based on their detailed data assessment, they are committed to work collaboratively with BrainStorm to identify a regulatory pathway forward, including opportunities to expedite statistical review of data from the Phase 3 trial.

Future development of NurOwn® in ALS may require additional clinical trials, including a Phase 3 FDA-approved multi dose trial. 

Patient Access Programs (ALS)

In December 2016,The Company, working collaboratively with the Company announced that it plansTel Aviv Sourasky Medical Center (Ichilov Hospital), was approved on March 7, 2019 to apply fortreat up to 13 ALS patients with NurOwn®, under the Israel Hospital Exemption regulatory pathway for NurOwn® in Israel that will allow patient access to NurOwn® as a treatment that has been granted Hospital Exemption. This recently approved pathway would permit the Company to partner with a medical center in Israel and be allowed to treat patients with NurOwn® for a fee. Hospital Exemption allows for advanced therapy medicinal products to be made available to a group of patients to be agreed uponAdvanced Therapy Medicinal Products (ATMP), which was adopted by the Israeli Ministry of Health. ItHealth (MoH) from the European Medicine Agency (EMA) regulation. This pathway enables the Company to make NurOwn® accessible to ALS patients in Israel, for a fee. This approval expired on March 7, 2020. Based on this approval, the Company enrolled twelve (12) patients under the HE regulatory pathway as of March 31, 2020 and intends to enroll the maximum number of patients that have been approved. The Hospital has received approval from the MoH for the extension of this program and to expand the HE regulatory pathway to include an additional 13 patients. Currently, the Company has not finished treating all the first 13 patients as non-Israeli patients are unable to travel to Israel at the present time due to COVID-19 travel restrictions. The Company is intended to providecurrently collecting HE clinical data for the patients who already received treatment at the Ichilov Hospital. Once the complete data set for the first 13 treated patients is available, the Company will perform a detailed analysis. Thus far, the Company has received $3.4 million in gross proceeds in connection with the possibilitytreatment of the aforementioned patients.

NurOwn in Progressive Multiple Sclerosis

On December 15, 2018, the FDA approved the Company's IND to benefit fromconduct a custom-made, innovative, individual treatment where there is a critical unmet needPhase 2 open label trial of repeated intrathecal administration of NurOwn® in progressive MS (PMS. www.clinicaltrials.gov Identifier NCT03799718). The study entitled ‘A Phase 2, open-label, multicenter study to evaluate the safety and an absenceefficacy of valid therapeutic alternatives. To qualifyrepeated administration of NurOwn® (Autologous Mesenchymal Stem Cells Secreting Neurotrophic Factors; MSC-NTF cells) in participants with Progressive Multiple Sclerosis (MS)’ will recruit 20 progressive MS patients at 5 leading US MS centers. As of the quarter ended March 31, 2020, the first nine (9) study participants have been enrolled in the study.

On December 18, 2019, the clinical trial independent Data Safety Monitoring Board (DSMB) for a Hospital Exemption, several important criteria must be met including preparation according to specific quality standards (equivalent to thosethe PMS study completed the first, pre-specified interim analysis, of safety outcomes for a licensed product), usethe first 9 participants enrolled in a hospital and use under the exclusive responsibilitystudy. After careful review of a medical practitioner.all available clinical trial data, the DSMB unanimously concluded “the study should continue as planned without any protocol modification”.

In March 2017,On November 14, 2019 the Company announced that italso received a $495,330 grant from the National Multiple Sclerosis Society, through its Fast Forward program, for serum and CSF biomarkers analysis in BrainStorm’s Phase 2 open-label, multicenter clinical trial of repeated intrathecal administration of NurOwn® in participants with progressive Multiple Sclerosis.

The trial has signed a Memorandumfaced delays in enrollment due to the COVID-19 pandemic. Scheduled March and April 2020 new patient enrollments were deferred to May 2020 due to site closures related to COVID-19, when some of Understanding (MOU) with affected healthcare sites anticipate their access restrictions will be mitigated. Enrollment will proceed in 2020 subject to any site access restrictions related to COVID-19. Top-line results may still be possible in the fourth quarter of 2020, if enrollment continues without COVID-19 disruptions.

The Medical Research, Infrastructure,Company is currently collecting the clinical and Health Services Fundbiomarker data from treated patients and plans to perform an interim analysis after 50% of the Tel Aviv Sourasky Medical Center (Ichilov Hospital) to explore the possibility of making NurOwn® available to Amyotrophic Lateral Sclerosis (ALS) patients under the provisions of Hospital Exemption regulation. The MOU sets forth the basic terms under which the Company and Tel Aviv Sourasky Medical Center would work together to submit the application to the Israeli MoH, and is subject to a definitive agreement. The agreement is expected to be formalized in the second half of 2017.trial have been treated.

Non-Dilutive Funding

In June 2017, the Company announced that for the tenth consecutive year its wholly-owned subsidiary, Brainstorm Cell Therapeutics Ltd., was awarded a new grant from Israel’s Office of the Chief Scientist (OCS), in the amount of approximately $2,100,000. The Office of the Chief Scientist, is part of the Ministry of Economy Program to support innovative technologies in Israel. The funds supported the development of NurOwn^® Phase 3 clinical program in ALS.

In July 2017, the Company announced thatwas awarded a grant in the amount of $15,912,390 from the California Institute for Regenerative Medicine (CIRM) has awarded Brainstorm a grant of up to $16 million to supportaid in funding the Company’s pivotal Phase 3 study of NurOwn®, for the treatment of amyotrophic lateral sclerosis (ALS).ALS. The award provided for a $5,250,000 project initial payment, which wasCompany received during the third quarter of 2017, and up to $15,912,000 in future milestone payments (inclusive$12,550,000 of the project initial payment).CIRM grant from 2017-2019: $9,050,000 from 2017 through 2018, and an additional $3,500,000 in 2019. On March 16, 2020, the Company announced that it had received an additional $2,200,000 from CIRM for achieving its pre-determined milestones. With the receipt of this grant, the Company has now received $14,750,000 of the total available $15,912,390 grant funding awarded by CIRM. The awardgrant does not bear a royalty payment commitment nor is the awardgrant otherwise refundable. The Company expects to receive approximately $1,162,390 in additional grant funding from CIRM upon achieving certain milestones.

On April 3, 2020, the Company announced that its wholly owned subsidiary, BrainStorm Cell Therapeutics Ltd., has been awarded a new non-dilutive grant of approximately $1.5 million by the Israel Innovation Authority (“IIA”). The grant enables the Company to continue development of advanced cellular manufacturing capabilities, furthers development of MSC-derived exosomes as a novel therapeutic platform, and will ultimately enable BrainStorm to expand the therapeutic pipeline in neurodegenerative disorders.

Intellectual Property

In October 2016,A key element of the Company announced that it has beenCompany’s overall strategy is to establish a broad portfolio of patents and other methods described below to protect its proprietary technologies and products. BrainStorm is the sole licensee or assignee of 15 granted patents 4 allowed patents and 22 patent applications in the United States, Europe, and Israel, as well as in additional countries worldwide, including countries in the Far East and South America (in calculating the number of granted patents, each European patent validated in multiple jurisdictions was counted as a single patent).

In March 2019, the European Patent No. 9,474,787Office ("EPO") granted a European-wide patent titled “Mesenchymal'Mesenchymal Stem Cells for the Treatmenttreatment of CNS Diseases.' The European Patent Application published in the European Patent Bulletin 19/13 on March 27, 2019, under Patent No. 2620493. The allowed claims cover mesenchymal stemthe isolated cells as well as their use in the manufacture of a medicament for treating a CNS disease or disorder, selected from the group consisting of: Parkinson's, multiple sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis, diabetic neuropathy, glaucomatous neuropathy, Alzheimer's disease and Huntington's disease.

On August 27, 2019, the Canadian Intellectual Property Office granted Canadian Patent No. 2,877,223 entitled ‘Methods of Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors’. The allowed claims cover the method for generating the Mesenchymal Stem Cells Secreting Neurotrophic Factors (MSC-NTF cells).

On September 16, 2019, the United States Patent and Trademark Office (USPTO) issued a Notice of Allowance for BrainStorm's new US Patent Application, number: 15/113,105, titled: ‘Method of Qualifying Cells'. The allowed claims cover a pharmaceutical composition for MSC-NTF cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived MSCs that secrete neurotrophic factors.

On October 21, 2019, the Japan Patent Office (JPO) issued a decision to Grant Japanese Patent Application, number: 2016-548691, titled: ‘Method of Qualifying Cells.’ The patent covers cell populations which are therapeutic for the treatment of ALS and the method of qualifying the cells for therapeutic use.

On December 6, 2019, the Hong Kong Patent Office sealed patent No. HK1182133 titled 'Mesenchymal Stem Cells for the treatment of CNS Diseases'.