Brainstorm Cell Therapeutics (BCLI) 10-Q 2023 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023.

or

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

For the transition period from _____________ to _____________

Commission File Number 001-36641

BRAINSTORM CELL THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

Delaware	20-7273918
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1325 Avenue of Americas, 28th Floor
New York, NY	10019
(Address of principal executive offices)	(Zip Code)

(201) 488-0460

(Registrant’s telephone number, including area code)

Not Applicable

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00005 par value	BCLI	NASDAQ Stock Market LLC (Nasdaq Capital Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

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

As of November 10, 2023, the number of shares outstanding of the registrant’s Common Stock, $0.00005 par value per share, was 48,981,588.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains numerous statements, descriptions, forecasts and projections, regarding Brainstorm Cell Therapeutics Inc. (together with its consolidated subsidiaries, the “Company,” “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 amyotrophic lateral sclerosis (“ALS”), the sufficiency of our existing capital resources for continuing operations in 2023 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, progressive multiple sclerosis (“PMS”), Alzheimer’s disease (“AD”) or other neurodegenerative diseases, our ability to manufacture and commercialize our NurOwn® treatment candidate, obtaining patents that provide meaningful protection, competition and market developments, our ability to protect our intellectual property from infringement by third parties, heath reform legislation, demand for our services, currency exchange rates and product liability claims and litigation, disruptions in our business due to continuing concerns resulting from the COVID-19 outbreak, adverse developments affecting the financial services industry, political instability, unrest and wars, such as the conflicts involving Ukraine and Russia and Israel and its surrounding regions, including our clinical development activities, and other factors described under “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2022. 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, 2022 in addition to the other information set forth herein and elsewhere in our other public filings with the Securities and Exchange Commission (“SEC”).

2

TABLE OF CONTENTS

		Page Number
PART I – FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II – OTHER INFORMATION		42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 5.	Other Information	44
Item 6.	Exhibits	45
SIGNATURES		46

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2023

U.S. DOLLARS IN THOUSANDS

(Except share data and exercise prices)

(UNAUDITED)

4

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2023

U.S. DOLLARS IN THOUSANDS

(Except share data and exercise prices)

(UNAUDITED)

INDEX

	Page
Interim Condensed Consolidated Balance Sheets	6
Interim Condensed Consolidated Statements of Comprehensive Loss	7
Interim Condensed Statements of Changes in Stockholders’Equity (Deficit)	8
Interim Condensed Consolidated Statements of Cash Flows	10
Notes to Interim Condensed Consolidated Financial Statements	12

5

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

	September 30,		December 31,
	2023		2022
	Unaudited		Audited
	U.S. $ in thousands
ASSETS
Current Assets:
Cash and cash equivalents	$	1,222	$	772
Short-term deposit (Note 4)		196		2,211
Other accounts receivable		66		91
Prepaid expenses and other current assets		55		32
Total current assets		1,539		3,106
Long-Term Assets:
Prepaid expenses and other long-term assets		21		23
Operating lease right of use asset (Note 6)		3,370		4,389
Property and Equipment, Net		752		933
Total Long-Term Assets		4,143		5,345
Total assets	$	5,682	$	8,451
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payables	$	3,926	$	6,224
Accrued expenses		63		84
Operating lease liability (Note 5)		1,306		1,427
Other accounts payables		1,026		1,065
Total current liabilities		6,321		8,800
Long-Term Liabilities:
Operating lease liability (Note 5)		1,585		2,666
Warrants liability (Note 6)		358		—
Total long-term liabilities	$	1,943	$	2,666
Total liabilities	$	8,264	$	11,466
Stockholders’ Equity:
Stock capital: (Note 7)		12		12
Common Stock of $0.00005 par value - Authorized: 100,000,000 shares September 30, 2023 and December 31, 2022 respectively; Issued and outstanding: 45,314,961 and 36,694,078 shares at September 30, 2023 and December 31, 2022 respectively.
Additional paid-in-capital		206,957		194,910
Treasury stocks		(116)		(116)
Accumulated deficit		(209,435)		(197,821)
Total stockholders’ equity (deficit)		(2,582)		(3,015)
Total liabilities and stockholders’ equity (deficit)	$	5,682	$	8,451

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

6

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

U.S. dollars in thousands

(Except share data)

	Nine months ended				Three months ended
	September 30,				September 30,
	2023		2022		2023		2022
	Unaudited				Unaudited
Operating expenses:
Research and development, net	$	9,048	$	11,505	$	3,330	$	3,776
General and administrative		7,587		8,402		2,705		3,065
Operating loss		(16,635)		(19,907)		(6,035)		(6,841)
Financial income (expenses), net		91		648		(121)		(17)
Gain on change in fair value of Warrants liability (Note 6)		4,930		—		4,930		—
Net loss	$	(11,614)	$	(19,259)	$	(1,226)	$	(6,858)
Basic and diluted net loss per share from continuing operations	$	(0.29)	$	(0.53)	$	(0.03)	$	(0.19)
Weighted average number of shares outstanding used in computing basic and diluted net loss per share		40,255,502		36,472,372		44,251,809		36,493,432

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

7

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

U.S. dollars in thousands

(Except share data)

			Additional			Total
	Common stock		paid-in	Treasury	Accumulated	stockholders’
	Number	Amount	capital	stocks	deficit	equity
Balance as of January 1, 2022	36,401,413	12	192,990	(116)	(173,544)	19,342
Stock-based compensation related to stock and options granted to directors and employees	84,767	*	505	—	—	505
Net loss	—	—	—	—	(5,360)	(5,360)
Balance as of March 31, 2022	36,486,180	12	193,495	(116)	(178,904)	14,487
Stock-based compensation related to stock and options granted to directors and employees	—	*	405	—	—	405
Net loss	—	—	—	—	(7,041)	(7,041)
Balance as of June 30, 2022	36,486,180	12	193,900	(116)	(185,945)	7,851
Stock-based compensation related to stock and options granted to directors and employees	55,599	*	395	—	—	395
Net loss	—	—	—	—	(6,858)	(6,858)
Balance as of September 30, 2022	36,541,779	12	194,295	(116)	(192,803)	1,388

*    Represents an amount less than $1.

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

8

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

U.S. dollars in thousands

(Except share data)

			Additional			Total
	Common stock		paid-in	Treasury	Accumulated	stockholders’
	Number	Amount	capital	stocks	deficit	equity
Balance as of January 1, 2023	36,694,078	12	194,910	(116)	(197,821)	(3,015)
Stock-based compensation related to stock and options granted to directors and employees	(18,827)	*	4	—	—	4
Issuance of shares in at-the-market (ATM) offering (Note 7)	1,800,000	*	3,230	—	—	3,230
Net loss	—	—	—	—	(5,059)	(5,059)
Balance as of March 31, 2023	38,475,251	12	198,144	(116)	(202,880)	(4,840)
Stock-based compensation related to stock and options granted to directors and employees	315,000	*	988	—	—	988
Issuance of shares in at-the-market (ATM) offering (Note 7)	2,136,494	*	5,299	—	—	5,299
Net loss	—	—	—	—	(5,329)	(5,329)
Balance as of June 30, 2023	40,926,745	12	204,431	(116)	(208,209)	(3,882)
Stock-based compensation related to stock and options granted to directors and employees	334,161	*	548	—	—	548
Issuance of shares for private placement (Note 7)	4,054,055	*	1,978	—	—	1,978
Net loss	—	—	—	—	(1,226)	(1,226)
Balance as of September 30, 2023	45,314,961	12	206,957	(116)	(209,435)	(2,582)

*    Represents an amount less than $1.

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

9

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. dollars in thousands

	Nine months ended				Three months ended
	September 30,				September 30,
	2023		2022		2023		2022
Cash flows used in operating activities:
Net loss	$	(11,614)	$	(19,259)	$	(1,226)	$	(6,858)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		199		215		65		70
Stock-based compensation related to options granted to employees and directors		1,540		1,305		548		395
Change in operating lease liability		(183)		(646)		(58)		(34)
Decrease in other accounts receivable and prepaid expenses		4		1,081		345		457
Increase (decrease) in trade payables		(298)		2,695		(1,264)		1,103
Gain on change in fair value of warrants (Note 6) (*)		(4,761)		—		(4,761)		—
Increase (decrease) in other accounts payable and accrued expenses		(60)		(63)		(58)		17
Total net cash used in operating activities	$	(17,173)	$	(14,672)	$	(6,409)	$	(4,850)

(*) Presented after neutralizing costs of issuance.

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

10

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. dollars in thousands

	Nine months ended				Three months ended
	September 30,				September 30,
	2023		2022		2023		2022
Cash flows from investing activities:
Purchase of property and equipment		(18)		(29)		(18)		(1)
Changes in short-term deposit		2,015		(11)		6		(10)
Total net cash provided by (used in) investing activities	$	1,997	$	(40)	$	(12)	$	(11)
Cash flows from financing activities:
Proceeds from issuance of shares in at-the-market (ATM) offering (Note 7)		8,529		—		—		—
Proceeds from Issuance of shares for private placement (Note 7) (*)		7,097		—		7,097		—
Total net cash provided by financing activities	$	15,626	$	—	$	7,097	$	—
Increase (decrease) in cash and cash equivalents		450		(14,712)		676		(4,861)
Cash and cash equivalents at the beginning of the period	$	772	$	18,856	$	546	$	9,005
Cash and cash equivalents at end of the period	$	1,222	$	4,144	$	1,222	$	4,144

(*) Presented after neutralizing costs of issuance.

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

11

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 1 - GENERAL

A. The Company was incorporated in the State of Delaware on November 15, 2006, and was previously incorporated in the State of Washington. In October 2004, the Company formed its wholly-owned subsidiary, Brainstorm Cell Therapeutics Ltd. (“BCT”) in Israel, which currently conducts all of the research and development activities of the Company. BCT formed wholly-owned subsidiaries Brainstorm Cell Therapeutics UK Ltd., in the United Kingdom on February 19, 2013 (currently inactive), Advanced Cell Therapies Ltd. in Israel on June 21, 2018 and Brainstorm Cell Therapeutics Limited in Ireland on October 1, 2019.

The  Company’s common stock, $0.00005 par value per share (the “Common Stock”) is publicly traded on the Nasdaq Capital Market under the symbol “BCLI”.

B. The Company, through BCT, holds rights to commercialize certain stem cell technology developed by Ramot of Tel Aviv University Ltd. (“Ramot”), (see Note 3). Using this technology, the Company has been developing novel adult stem cell therapies for debilitating neurodegenerative disorders such as ALS (also known as Lou Gherig Disease), PMS and Parkinson’s disease. The Company developed a proprietary process, called NurOwn®, for the propagation of Mesenchymal Stem Cells and their differentiation into neurotrophic factor secreting cells. These cells are then transplanted at or near the site of damage, offering the hope of more effectively treating neurodegenerative diseases. The process is currently autologous, or self-transplanted.

C. Since its inception, the Company has devoted substantially all its efforts to research and development. The Company is still in its development and clinical stage and has not yet generated revenues. The Company has incurred operating losses since its inception and expects to continue to incur operating losses for the near-term. As of September 30, 2023, the Company had an accumulated deficit of approximately $209 million. The extent of the Company’s future operating losses and the timing of becoming profitable are uncertain.

The Company’s primary sources of cash have been proceeds from the issuance and sale of its Common Stock and warrants, the exercise of warrants, sales of Common Stock via its at-the-market (“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. The Company has not yet commercialized any of its product candidates. Even if the Company commercializes one or more of its product candidates, it may not become profitable in the near-term. The Company’s ability to achieve profitability depends on several factors, including its ability to obtain regulatory approval for its product candidates, successfully complete any post-approval regulatory obligations and successfully commercialize its product candidates alone or in partnership.

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 via its ATM program and other potential funds as mentioned. However, as mentioned above, 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.

12

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

A. Unaudited Interim Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP 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 fiscal year ended December 31, 2022.

Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

B. Significant Accounting Policies

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

C. Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.

D. Use of estimates

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

13

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 3 - RESEARCH AND LICENSE AGREEMENT

In 2004, the Company entered into a Research and License Agreement, as amended and restated, with Ramot (the “License Agreement”). Pursuant to the remuneration terms of the License Agreement, the Company has agreed to pay Ramot royalties on Net Sales of the Licensed Product as follows:

a) So long as the making, producing, manufacturing, using, marketing, selling, importing or exporting (collectively, the “Commercialization”) of such Licensed Product is covered by a Valid Claim or is covered by Orphan Drug Status, the Company shall pay Ramot a royalty of 5% of the Net Sales received by the Company and resulting from such Commercialization; and

b) In the event the Commercialization of the Licensed Product is neither covered by a Valid Claim nor by Orphan Drug status, the Company shall pay Ramot a royalty of 3% of the Net Sales received by the Company resulting from such Commercialization. This royalty shall be paid from the First Commercial Sale of the Licensed Product and for a period of fifteen (15) years thereafter.

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 deposits on September 30, 2023 and December 31, 2022 include bank deposits bearing annual interest rate of 0.15% to 1.66%.

14

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 5 - LEASES

As of September 30, 2023, the Company’s right-of-use assets and lease liabilities for operating leases totaled $3,370 and $2,891, respectively.

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

	Nine Months Ended
	September 30,
	2023
Cash payments for operating leases	$	1,908

As of September 30, 2023, the Company’s operating leases had a weighted average remaining lease term of 2.37 years and a weighted average discount rate of 6.75%. Future lease payments under operating leases as of September 30, 2023 were as follows:

	Operating
	Leases
2023		335
2024		1,340
2025		1,243
2026		179
Total future lease payments		3,097
Less imputed interest		(206)
Total lease liability balance		2,891

NOTE 6 - WARRANTS LIABILITY

In July 2023, the Company issued 4,054,055 shares of common stock and 4,054,055 private placement warrants (“July 2023 warrants”) to purchase shares of common stock. The gross proceeds from this transaction were approximately $7.5 million.

The Common Warrants contain provisions regarding settlement in the event of a fundamental transaction that calculate the fair value of the warrants using a prespecified volatility assumption that was not consistent with the input used to value the warrants at issuance which causes the warrants to be classified as liabilities. The Common Warrants will be measured at fair value at inception and in subsequent reporting periods with changes in fair value recognized as financial income or expense as change in fair value of warrant liabilities in the period of change in the condensed consolidated statements of comprehensive loss.

A total issuance costs of $ 403 were allocated proportionally to the warrants liability, $169, and to the equity, $234, according to its fair value on the grant date. The fair value of the warrants at issuance was $5,288, and its issuance costs related were classified to finance expenses

July 2023 warrants are classified as Level 3 financial instruments in the fair value hierarchy (refer to Note 8, Fair Value Measurement). As of September 30, 2023, the July 2023 warrants were outstanding with fair values of $358. The fair value of the warrant liability for the period since issuance till September 30, 2023 decreased by $4,930. The change has been recognized as gain on change in fair value of derivatives in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.

15

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 7 – STOCK CAPITAL

The rights of Common Stock are as follows:

Holders of the 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:

At-the-market (ATM) Offering:

On August 9, 2021, the Company entered into an Amended and Restated Distribution Agreement (the “New Distribution Agreement”) with the Agents (as defined in the New Distribution Agreement) pursuant to which the Company may sell from time to time, through the Agents, shares of Common Stock (the “Shares”), having an aggregate offering price of up to $100,000,000 (the “August 9, 2021 ATM”). Sales under the August 9, 2021 ATM are to be made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on The Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and the Agents. In connection with the New Distribution Agreement, the Company terminated the previous Distribution Agreement and the September 25, 2020, ATM. During the nine months ended September 30, 2023, the Company sold 3,936,494 Shares for gross proceeds of approximately $8,793,397 under the August 9, 2021 ATM.

Securities Purchase Agreement:

On July 17, 2023, the Company entered into a Securities Purchase Agreement with the purchaser named therein, pursuant to which the Company agreed to sell, in a public offering (the “Offering”), an aggregate of 4,054,055 shares of Common Stock, together with accompanying warrants (the “Common Warrants”) to purchase 4,054,055 shares of Common Stock, at a purchase price of $1.85 per share and accompanying warrants for gross proceeds to the Company of approximately $7.5 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Offering closed on July 19, 2023. The Common Warrants are immediately exercisable, expire five years following the date of issuance and have an exercise price of $2.00 per share. Please refer to Note 6.

Capital Raised Since Inception:

Since its inception through September 30, 2023, the Company has raised approximately $161 million gross in cash in consideration for issuances of Common Stock and warrants in private placements and public offerings as well as proceeds from warrants exercises.

Stock Plans:

During the fiscal year ended December 31, 2022, the Company had outstanding awards for stock options under four stockholder approved plans: (i) the 2004 Global Stock Option Plan and the Israeli Appendix thereto (the “2004 Global Plan”) (ii) the 2005 U.S. Stock Option and Incentive Plan (the “2005 U.S. Plan,” and together with the 2004 Global Plan, the “Prior Plans”); (iii) the 2014 Global Share Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) (the “2014 Global Plan”); and (iv) the 2014 Stock Incentive Plan (the “2014 U.S. Plan” and together with the 2014 Global Plan, the “2014 Plans”).

The 2004 Global Plan and 2005 U.S. Plan expired on November 25, 2014 and March 28, 2015, respectively. Grants that were made under the Prior Plans remain outstanding pursuant to their terms. The 2014 Plans were approved by the stockholders on August 14, 2014 (at which time the Company ceased to issue awards under each of the 2005 U.S. Plan and 2004 Global Plan) and amended on June 21, 2016 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.

16

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 7 – STOCK CAPITAL (Cont.):

Stock Plans (Cont.):

The 2014 Plans have a shared pool of 5,600,000 shares of Common Stock available for issuance. As of September 30, 2023, 2,206,729 shares were available for future issuances under the 2014 Plans. The exercise price of the options granted under the 2014 Plans may not be less than the nominal value of the shares into which such options are exercised. Any options under the 2014 Plans that are canceled or forfeited before expiration become available for future grants. The Governance, Nominating and Compensation Committee (the “GNC Committee”) of the Board of Directors of the Company administers the Company’s stock incentive compensation and equity-based plans.

Share-based compensation to employees and to directors:

Under the 2014 Plans, the Company may award stock options to certain employees, officers, directors, and/or service providers. The stock options vest in accordance with such conditions and restrictions determined by the GNC Committee.

Stock options:

These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a specified period. Stock options awarded are valued based upon the Black-Scholes option pricing model and the Company recognizes this value as stock compensation expense over the periods in which the options vest. Use of the Black Scholes option-pricing model requires that the Company make certain assumptions, including expected volatility, risk-free interest rate, expected dividend yield, and the expected life of the options. The Company granted 418,600 stock options during the nine months ended September 30, 2023.

Stock options fair value assumptions for the stock options granted during the nine months ended September 30, 2023 are as follows:

	For the Nine
	months ended
	September 30,
	2023
Option life (years)	10
Risk free interest rate	3.40%-4.49	%
Dividend yield	0
Expected volatility	91%-118	%
Expected life (years)	5.04 -5.50

A summary of the Company’s option activity related to options to employees and directors, and related information as of September 30, 2023, is as follows:

	For the Nine months ended
	September 30, 2023
		Weighted
		average	Aggregate
	Amount of	exercise	intrinsic
	options *	price	value
		$	$
Outstanding at December 31, 2022	1,510,117	3.9632	—
Granted	418,600	1.73	—
Forfeited	(92,000)	6.6674	—
Outstanding at September 30, 2023	1,836,717	3.3188	—
Exercisable at September 30, 2023	1,190,991	3.2727	—

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

17

BRAINSTORM CELL THERAPEUTICS INC. AND SUBSIDIARIES

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to the Interim Condensed Consolidated Financial Statements

NOTE 7 – STOCK CAPITAL (Cont.):

Stock options (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, 2023, 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.

As of September 30, 2023, there was $831 of total unrecognized compensation cost related to non-vested options under the Plan. The cost is expected to be recognized over a weighted average period of 1.65 years. Compensation expense recorded by the Company in respect of its stock-based employees and directors compensation awards in accordance with ASC 718-10 for the nine months ended September 30, 2023 and 2022 amounted to $229 and $740, respectively.

Restricted Stock:

The Company awards stock and restricted stock to certain employees, officers, directors, and/or service providers. The restricted stock vests in accordance with such conditions and restrictions determined by the GNC Committee. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a specified restricted period. The purchase price (if any) of shares of restricted stock is determined by the GNC Committee. If the performance goals and other restrictions are not attained, the grantee will automatically forfeit their unvested awards of restricted stock to the Company. Compensation expense for restricted stock is based on fair market value at the grant date.

			Weighted Average
			Remaining
	Number of Shares	Weighted Average	Contractual
	of Restricted	Grant Date Fair	Term
	Stock	Value	(Years)
Nonvested as of December 31, 2022	217,027	5.01	1.40
Granted	684,161	2.27	—
Vested	542,464	2.91	—
Forfeited	53,827	4.09	—
Nonvested as of September 30, 2023	304,897	2.86	1.57

Compensation expense recorded by the Company in respect of its stock and restricted stock awards to certain employees, officers, directors, and/or service providers for the nine months ended September 30, 2023 and September 30, 2022 amounted to $1,310 and $565, respectively.

As of September 30, 2023, there was $553 of total unrecognized compensation cost related to non-vested restricted stock under the Plan. The cost is expected to be recognized over a weighted average period of 1.66 years.

Total Stock-Based Compensation Expense

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

	Nine months ended
	September 30,
	2023		2022
Research and development	$	1,108	$	286
General and administrative		432		1,019
Total stock-based compensation expense	$	1,540	$	1,305

18

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 – FAIR VALUE MEASUREMENT

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and warrants.

Accounting standards establish a hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Accounting standards require financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and the exercise of this judgment may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, contract assets, contract liabilities and accounts payable are considered to be representative of their fair value due to the short maturity of these instruments.

Warrants Liabilities

The July 2023 warrants are classified as Level 3 financial instruments. The Company estimated the fair value of the July 2023 warrants using the Black-Scholes model at inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, risk-free interest rate, volatility, and time to expiration. The volatility involves unobservable inputs classified as Level 3 of the fair value hierarchy. The assumptions used to determine the fair value of the July 2023 are as follows:

	July 19, 2023			September 30, 2023
Time to expiration		5 years			4.8 years
Common stock price	$	1.81		$	0.20
Risk-free interest rate		3.98			4.62
Volatility		94	%		105	%

19

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 9 – SUBSEQUENT EVENTS

A. On October 7, 2023, subsequent to the reporting period, the State of Israel, where the Company operates and employs some of its employees, was attacked by and subsequently declared war on Hamas (the “War”). The War is on-going as of the issuance date of these financial statements. As of the date of the filing, the War has no direct effect on the Company’s activities.

B. On October 24, 2023 the Company announced a strategic realignment to enable accelerated development of NurOwn ® for the treatment of ALS. This realignment is designed to 1) support the company plans to conduct a double-blind, placebo-controlled Phase 3b U.S. clinical trial for NurOwn in ALS with an open-label extension and 2) continue to publish data from NurOwn’s Phase 3 clinical trial on: biomarkers, long-term safety and survival, and the Expanded Access Program, providing transparency around NurOwn data and progressing ALS drug development. In preparation for the trial design and subsequent meeting with FDA, BrainStorm is consulting with the NurOwn Principal Investigators, who are most familiar with NurOwn, an additional panel of independent ALS experts, and a patient advisory group.

To fund the Phase 3b study and ALS priorities, BrainStorm is actively exploring various options to raise capital including non-dilutive grants and capitalizing on its exosome technology. At the same time, the company will reduce and refocus resources by streamlining clean room operations and undertaking a targeted reduction in headcount of approximately 30 percent. Positions most critical to the implementation of the Phase 3b trial and regulatory submission and review will be retained. The strategic realignment will include approximately 50% reduction in key operating expenses, including payroll, clean room facilities, lab materials and rent. As part of this strategic realignment, Dr. Kirk Taylor, EVP and Chief Medical Officer, stepped down from his post, which largely focused on leading global medical affairs and broader launch activities. Certain other positions that are outside the current prioritized scope will be eliminated.

C. On November 1, 2023, a purported shareholder of the Company filed a putative securities class action complaint against the Company and certain of its officers, captioned Sporn v. Brainstorm Cell Therapeutics Inc., et al., Case No. 1:23-cv-09630 (the “Complaint”), in the United States District Court for the Southern District of New York (the “Securities Action”). The Securities Action alleges violations of Sections 10(b) of the Securities and Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder against all defendants and control person violations of Section 20(a) against the individual defendants, relating to NurOwn for the treatment of ALS, the Company’s submissions to and communications with the FDA in support of the approval of NurOwn for the treatment of ALS, and the prospects of future approval of NurOwn by the FDA. The Securities Action seeks, among other things, damages in connection with an allegedly inflated stock price between August 15, 2022 and September 27, 2023, as well as attorneys’ fees and costs. The Company intends to vigorously defend against the lawsuit.

D. On November 1, 2023, the Company received a letter from the listing qualifications department staff of The Nasdaq Stock Market(“Nasdaq”)  indicating that the Company is not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Bid Price Requirement”).

The Company intends to actively monitor the closing bid price of the Company’s common stock and will take all reasonable measures available to the Company to regain compliance with the Bid Price Requirement. However, there can be no assurance that the Company will be able to regain or maintain compliance with the applicable continued listing standards set forth in the Nasdaq Listing Rules.

In Addition, on November 6, 2023, the Company received a letter from the listing qualifications department staff of Nasdaq notifying the Company that from September 25, 2023 to November 3, 2023, the Company’s Market Value was below the minimum of $35 million required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”).

20

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 9 – SUBSEQUENT EVENTS (Cont.):

The MVLS Deficiency Notice has no immediate effect on the listing of the Common Stock, and the Common Stock continues to trade on the Nasdaq Capital Market under the symbol “BCLI.”

The Company intends to actively monitor the Company’s MVLS between now and the May 6, 2024 and will take all reasonable measures available to the Company to regain compliance with the MVLS Requirement. While the Company is exercising diligent efforts to maintain the listing of the Common Stock on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with the applicable continued listing standards set forth in the Nasdaq Listing Rules.

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.

21

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

Company Overview

Brainstorm Cell Therapeutics Inc. (“Brainstorm” or the “Company”) is a leading biotechnology company committed to the development and commercialization of best-in-class autologous cellular therapies for the treatment of neurodegenerative diseases, including Amyotrophic Lateral Sclerosis (“ALS”, also known as Lou Gehrig’s disease); Progressive Multiple Sclerosis (“PMS”); Alzheimer’s disease (“AD”); and other neurodegenerative diseases. NurOwn®, our proprietary cell therapy platform, leverages cell culture methods to induce autologous bone marrow-derived mesenchymal stem cells (“MSCs”) to secrete high levels of neurotrophic factors (“NTFs”), modulate neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and improve neurological function.

NurOwn® has completed a Phase 3 ALS and Phase 2 PMS clinical trials. On November 17, 2020, we announced top-line data from our Phase 3 ALS trial. On March 24, 2021, we announced positive top-line data from our Phase 2 PMS trial evaluating three repeated intrathecal administrations of NurOwn®, each given 2 months apart, as a treatment for PMS. On August 15, 2022, we announced our decision to submit a Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for NurOwn® for the treatment of ALS. On September 9, 2022, we filed a BLA to the FDA for NurOwn® for the treatment of ALS. On November 10, 2022, we announced that we had received a refusal to file (“RTF”) letter from the FDA regarding our BLA. The FDA indicated that we may request a Type A meeting to discuss the content of the RTF letter. On December 12, 2022, we announced the submission of a Type A meeting request with FDA to discuss the contents of the RTF letter previously issued by the FDA regarding the BLA for NurOwn® for the treatment of ALS. On December 27, 2022, we announced that the FDA granted a Type A meeting to discuss the contents of the RTF letter previously issued regarding our BLA for NurOwn® for the treatment of ALS. The Type A Meeting was held on January 11, 2023. The perspective shared by the FDA review team reflected what was in the previously issued RTF letter. Conversations with the FDA on the best pathway to resolve the outstanding questions that remained, continued following the Type A meeting. During these discussions, BrainStorm was presented with multiple options to return the BLA to regulatory review, which included the regulatory procedure to File over Protest. Additionally, within these discussions, FDA committed to review amendments that were filed to address items raised in the RTF letter. These discussions resulted in BrainStorm requesting the FDA to file our BLA over Protest, as this was the regulatory procedure that would allow us to reach an Advisory Committee (“ADCOM”) in the shortest amount of time. BrainStorm notified the FDA on February 6, 2023 of our decision to request the FDA to file the NurOwn® BLA for ALS over Protest. We received confirmation from FDA that the BLA was re-filed on February 7, 2023. We received the FDA Type A meeting minutes on February 9, 2023. We submitted an amendment to our BLA on March 6, 2023, in which we responded to the majority of the items included in the RTF letter. Written feedback was received on March 22, 2023, from the FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn® BLA for ALS. On March 27, 2023, we announced that the FDA will hold an ADCOM to discuss the company’s BLA for NurOwn® for the treatment of ALS. On June 6, 2023, we announced that the advisory committee meeting has been scheduled for September 27, 2023. On September 22, 2023, we submitted an amendment to our BLA to revise the indication to NurOwn® for the treatment of mild to moderate ALS. On September 27, 2023 we announced that the Advisory Committee voted, with 17 voting no, one voting yes, and one abstention, that NurOwn® did not demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS. On October 18, 2023, we announced that FDA invited the Company to request an expedited face-to-face meeting to discuss the path forward for NurOwn® as a treatment for ALS. BrainStorm remains committed to the ALS Community and is actively exploring the next steps in support of NurOwn®, including publication of emerging clinical data and development of a protocol for an additional clinical study. On October 18, 2023 Brainstorm announced that the BLA for NurOwn® would be withdrawn. The BLA was withdrawn on November 3, 2023. The decision to withdraw the BLA was coordinated with FDA and is viewed by FDA as a withdrawal without prejudice.

Our wholly owned Israeli subsidiary, BrainStorm Cell Therapeutics Ltd. (“Israeli Subsidiary”), holds exclusive rights to commercialize NurOwn® technology through a licensing agreement with Ramot (“Ramot”), the technology transfer company of Tel Aviv University, Israel.

NurOwn® has a strong and comprehensive intellectual property portfolio and was granted Fast Track designation by the FDA and Orphan Drug status by the FDA and the European Medicines Agency (“EMA”) for ALS.

Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and new employees, advisors and consultants to accomplish our goal of developing and launching a novel cell therapy for neurodegenerative diseases. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and our success by motivating such individuals to perform to the best of their abilities and achieve our objectives. We currently employ 42 employees in the United States and in Israel. Most of the senior management team are based in the United States, and all of our late phase clinical trial

22

sites for ALS and PMS are in the United States. Our R&D center is located in Petach Tikva, Israel. In addition, we currently lease one GMP manufacturing facility in Tel Aviv at the Sourasky Medical Center to manufacture NurOwn®. This facility increases our capacity and expand our ability to manufacture and ship NurOwn® into the EU, the U.S. and to local Israeli markets.

Recent Highlights

● On November 10, 2022, we announced that we had received an RTF letter from the FDA regarding our BLA for NurOwn® for the treatment of ALS. The FDA informed the Company that its BLA is not sufficiently complete to enable a substantive review and that the FDA would therefore not file the BLA.

● On December 12, 2022, we announced the submission of a Type A meeting request with FDA to discuss the contents of the RTF letter previously issued by the FDA regarding the company’s BLA for NurOwn® for the treatment of ALS.

● On December 27, 2022, we announced that the FDA granted a Type A meeting to discuss the contents of the RTF letter previously issued regarding the company’s BLA for NurOwn® for the treatment of ALS. The Type A Meeting was held on January 11, 2023.

● On January 4, 2023, we announced the promotion of Dr. Stacy Lindborg to the role of Co-Chief Executive Officer of the Company, launching a targeted capability build which will be led by Dr. Lindborg, to hire and bring expertise inside Brainstorm.

● On January 4, 2023, we announced the presentation of a corporate and clinical overview at the Biotech Showcase™ 2023 (Hilton San Francisco Union Square) on Monday, January 9, 2023, which was co-presented by Chaim Lebovits, President and Co-Chief Executive Officer of the Company, and Dr. Lindborg.

● On January 10, 2023, we announced we had partnered with NEALS, The ALS Association, and I AM ALS to provide public access to biospecimens from NurOwn’s® Phase 3 ALS Study. Serum and cerebrospinal fluid samples from the Phase 3 study of NurOwn® in ALS will be donated to the NEALS biorepository for use by the research community. The specimens are being submitted to the biorepository in connection with a $500,000 grant previously awarded to Brainstorm by The ALS Association and I AM ALS, to support biomarker research.

● On January 20, 2023, Dr. Lindborg gave a presentation titled “The Debamestrocel (NurOwn®) Treatment Effect in Phase 3 as accessed by ALSFRS-R and CSF Biomarkers” at the 13^th Annual California ALS Research Summit in San Francisco, California. The presentation demonstrated that NurOwn® had significantly better outcomes in analyses controlling for the floor effect. Outcomes that aligned with historical data and power calculations of the trial.

● On March 20, 2023, Dr. Lindborg presented a scientific poster titled “Measuring the rate of impairment in ALS patients using the Revised-ALS Functional Rating Scale: Key Insights into the Floor Effect of the Scale” at the 2023 Muscular Dystrophy Association Clinical and Scientific Conference in Dallas, Texas held March 19-22, 2023. The presentation showed that a floor effect was observed in the PRO-ACT database, and a pattern of a plateau in ALSFRS-R total score was accompanied by scale items of 0 suggesting measurement challenges in those with advanced ALS due to the floor effect of the ALSFRS-R in the NurOwn® Phase 3 trial and historical studies which are included in the PRO-ACT database. Analyses conducted in those not impacted by the floor effect at baseline of the NurOwn® Phase 3 trial revealed statistically significant, clinically meaningful effects with NurOwn® on the primary and key secondary endpoints.

● On May 3, 2023, Dr. Lindborg, presented “A discussion of NurOwn’s® Full Data Package” at the Everything ALS Experts Talk Series. The presentation summarized key dates in the FDA regulatory review process for NurOwn’s® including the current status of being under active review. Data illustrating the extent of impact of participants with Advanced ALS disease who were included in the trial and resulted in the inability to accurately measure disease progression in the trial, confounding the treatment effect from the Phase 3 trial, in addition to sharing analyses minimizing this impact which demonstrate an important treatment effect across study endpoints.

● On May 17 and 18, 2023, Dr. Lindborg and Antonio Trejo Diaz, Vice President, Regulatory Affairs of the Company, participated as invited expert speakers at the 2023 ALS Drug Development summit which was focused on transforming translational tools to accelerate future ALS approvals. Dr. Lindborg presented an invited talk entitled “Reviewing ALSFRS-R as the Established Endpoint for ALS Clinical trials.”

23

● On June 6, 2023, we announced that the advisory committee meeting has been scheduled for September 27, 2023, and will be available for live streaming. In addition, we announced that BrainStorm’s BLA for NurOwn® was assigneda PDUFA action date targeted to occur by December 8, 2023.

● On June 21, 2023, Dr. Lindborg and Mr. Lebovits participated in a fireside chat at the Maxim Group Healthcare Virtual Conference.

● During the week of July 7, 2023, Dr. Lindborg presented new biomarker data from the Phase 3 trial of its late-stage investigational ALS treatment, NurOwn® at the 2023 ALS and Related Motor Neuron Diseases Gordon Research Conference. These data show that treatment with NurOwn® significantly elevated markers of neuroprotection and lowered markers of neuroinflammation and neurodegeneration, including neurofilament light (“NfL”) over time compared to placebo in all trial participants. The presentation provides further evidence of the importance of NfL as a prognostic biomarker for ALS and predictive biomarker following NurOwn® treatment. A causal inference model demonstrated that NurOwn® driven NfL reductions were associated with better clinical outcomes.

● On September 22, 2023, we submitted an amendment to our BLA to revise the indication to NurOwn® for the treatment of mild to moderate ALS.

● On September 27, 2023 we announced that the Advisory Committee of the Board of Directors of the Company (the “Advisory Committee”) voted, with 17 voting no, one voting yes, and one abstention, that NurOwn® did not demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS.

● On October 18, 2023, we announced that FDA invited the Company to request an expedited face-to-face meeting to discuss the path forward for NurOwn® as a treatment for ALS. BrainStorm remains committed to the ALS Community and is actively exploring the next steps in support of NurOwn®, including publication of emerging clinical data and development of a protocol for an additional clinical study. On October 18, 2023 Brainstorm also announced that the BLA for NurOwn® would be withdrawn. The BLA was withdrawn on November 3, 2023. The decision to withdraw the BLA was coordinated with FDA and is viewed by FDA as a withdrawal without prejudice.

NurOwn® Proprietary Technology

NurOwn® technology is based on an innovative manufacturing protocol, which induces the differentiation of purified and expanded bone marrow-derived MSC and consistently generates cells that release high levels of multiple neurotrophic factors (“MSC-NTF” cells) to modulate neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and improve neurological function. These factors are known to be critical for the growth, survival and differentiation of neurons, including: glial-derived neurotrophic factor (“GDNF”); brain-derived neurotrophic factor (“BDNF”); vascular endothelial growth factor (“VEGF”); hepatocyte growth factor (“HGF”), and Galectin-1 among others. VEGF is one of the most potent neuronal and motor neuron survival factors and has demonstrated important neuroprotective effects in ALS and several other neurodegenerative diseases.

NurOwn® manufacturing involves a multi-step process that includes the following: harvesting and isolating undifferentiated stem cells from the patient’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 intrathecal (“IT”) administration of MSC-NTF cells into the same patient by standard lumbar puncture. This administration procedure does not require hospitalization and has been shown to be generally well tolerated in multiple CNS clinical trials to date. The completed NurOwn® U.S. Phase 3 ALS and the NurOwn® U.S. Phase 2 PMS trials evaluated the therapeutic potential of repeated intrathecal MSC-NTF cell administration (three doses at bi-monthly intervals).

The proprietary technology and manufacturing processing of NurOwn® (MSC-NTF cells) for clinical use is conducted in full compliance with current Good Manufacturing Practice (“cGMP”). The NurOwn® proprietary technology is fully owned or developed by our Israeli Subsidiary. All granted patents related to NurOwn® (MSC-NTF cells) manufacturing process are fully assigned to or owned by our Israeli Subsidiary (please see Intellectual Property section for details).

The NurOwn® Treatment Process

● Bone marrow aspiration from the patient;

● MSC Isolation and propagation;

● MSC Cryopreservation;

24

● MSC thawing and differentiation into neurotrophic-factor secreting (MSC-NTF; NurOwn®) cells; and

● Intrathecal administration into the patient’s cerebrospinal fluid by standard lumbar puncture.

Differentiation before Treatment

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

The specialized MSC-NTF cells secrete multiple neurotrophic factors and immunomodulatory cytokines that may result in:

● Protection of existing neurons;

● Promotion of neuronal repair;

● Neuronal functional improvement; and

● Immunomodulation and reduced neuroinflammation.

Autologous (Self-transplantation)

The NurOwn® technology platform is autologous, using the patient’s own bone-marrow derived stem cells for “self-treatment”. In autologous cellular treatment, 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, autologous stem cells is free of several ethical concerns associated with the use of embryonic-derived stem cells in some countries.

NurOwn® ALS Clinical Program

We announced top-line data from the Phase 3 clinical trial of NurOwn® in ALS on November 17, 2020. We have been granted Fast Track designation by the FDA for this indication, and have been granted Orphan Drug Status, in the U.S. and Europe, which provides us the potential for an extended period of exclusivity. On August 15, 2022, we announced our decision to submit a BLA to the FDA for NurOwn® for the treatment of ALS. The BLA was filed on September 9, 2022. On November 10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA. The FDA indicated that we could request a Type A meeting to discuss the content of the RTF letter, and the Type A meeting was held on January 11, 2023. On March 27, 2023, we announced that the FDA will hold an ADCOM to discuss the company’s BLA for NurOwn® for the treatment of ALS. Given the goal to proceed to an ADCOM as expeditiously as possible, BrainStorm requested that CBER utilize the FDA’s File Over Protest procedure and has filed an amendment to the BLA which responds to most of the outstanding questions the FDA has posed. On June 6, 2023, we announced that the advisory committee meeting has been scheduled for September 27, 2023. On September 22, 2023, we submitted an amendment to our BLA to revise the indication to NurOwn® for the treatment of mild to moderate ALS. On September 27, 2023 we announced that the Advisory Committee voted, with 17 voting no, one voting yes, and one abstention, that NurOwn® did not demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS. On October 18, 2023, we announced that FDA invited the Company to request an expedited face-to-face meeting to discuss the path forward for NurOwn® as a treatment for ALS. BrainStorm remains committed to the ALS Community and is actively exploring the next steps in support of NurOwn®, including publication of emerging clinical data and development of a protocol for an additional clinical study. On October 18, 2023 Brainstorm also announced that the BLA for NurOwn® would be withdrawn. The BLA was withdrawn on November 3, 2023. The decision to withdraw the BLA was coordinated with FDA and is viewed by FDA as a withdrawal without prejudice.

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 in Jerusalem, Israel, as well as a Phase 2 double-blind, placebo-controlled, multicenter clinical trial at three prestigious U.S. Medical centers - the Massachusetts General Hospital in Boston, Massachusetts Memorial Hospital in Worcester, Massachusetts, and the Mayo Clinic in Rochester, Minnesota - all highly experienced in the management, investigation, and treatment 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

25

administration. These studies demonstrated the tolerability of NurOwn® by both routes of administration and showed preliminary signs of activity.

In January 2016, the results of the two completed Phase 1/2 study and Phase 2 open label trials were published in JAMA Neurology. The results demonstrated a slower rate of disease progression following MSC-NTF cell treatment as measured by the ALSFRS-R, the gold standard for the evaluation of ALS functional status, and Forced Vital Capacity, a measure of pulmonary function, as well as positive trends in the rate of decline of muscle volume and the compound motor axon potential. This was the first published clinical data using autologous mesenchymal stem cells, induced under culture conditions to produce NTFs, with the potential to deliver a combined neuroprotective and immunomodulatory therapeutic effect in ALS and potentially modify the course of this disease.

Phase 2 ALS Randomized Trial

The Phase 2 U.S. study was conducted under an FDA Investigational New Drug (“IND”) application. This randomized, double-blind, placebo-controlled multi-center U.S. Phase 2 clinical trial evaluating NurOwn® in ALS patients was conducted at three clinical sites: (i) the Massachusetts General Hospital in Boston, (ii) Massachusetts Memorial Hospital in Worcester, Massachusetts, and (iii) the Mayo Clinic in Rochester, Minnesota. For this trial, NurOwn® was manufactured at the Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute in Boston and at the Human Cellular Therapy Lab at the Mayo Clinic. In this study, 48 patients were randomized 3:1 to receive NurOwn® or placebo.

Results of this Phase 2 Study were published in the peer reviewed Journal ‘Neurology’. The publication titled “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:

The study achieved its primary objective, demonstrating that NurOwn® treatment was well-tolerated. There were no discontinuations from the trial due to adverse events (“AEs”) and there were no deaths in the study. The most common AEs of mild or moderate severity, were transient procedure-related AEs such as headache, back pain, pyrexia arthralgia and injection-site discomfort, which were more commonly seen in the NurOwn®-treated participants compared to placebo.

NurOwn® achieved multiple secondary efficacy endpoints, showing evidence of a clinically meaningful benefit. Notably, response rates in the ALS functional rating scale (48-point ALSFRS-R outcome measure) were higher in NurOwn®-treated participants, compared to placebo, at all study timepoints over 24 weeks.

A pre-specified responder analysis examined percentage improvements in the post treatment ALSFRS-R slope (in points change per month) compared to pre-treatment slope and demonstrated that a higher proportion of NurOwn® treated participants achieved a 100% improvement in the post-treatment vs. pre-treatment slope, compared to the placebo group. This analysis also demonstrated that a higher proportion of the NurOwn® treated participants achieved a 1.5 point per month or greater improvement in the post-treatment vs. pre-treatment ALSFRS-R slope, compared to the placebo group.

The treatment effects were greater in the rapid progressor subgroup (a pre-specified definition, in which pretreatment ALSFRS-R declined by 2 or more points in the three months pre-treatment).

As an important confirmation of NurOwn®’s mechanism of action, levels of neurotrophic factors and inflammatory markers were measured in the cerebrospinal fluid (“CSF”) samples collected from participants pre-treatment and two weeks post treatment. In the samples of those participants treated with NurOwn®, statistically significant increases in levels of neurotrophic factors VEGF, HGF and LIF and a statistically significant reduction in inflammatory markers MCP-1, SDF-1 and CHIT-1 were observed post-treatment. Furthermore, the observed reduction in inflammatory markers correlated with ALS functional improvements. These clinical-biomarker correlations were not seen in placebo-treated participants, consistent with the proposed combined neuroprotective and immunomodulatory mechanism of action of NurOwn® in ALS.

In summary, a higher proportion of NurOwn® treated participants, particularly those with more rapid disease progression, using a pre-defined definition, experienced stabilization or improvement in ALS function, as measured by the change in post-treatment vs. pre-treatment ALSFRS-R rate of decline or slope.

26

Phase 3 ALS Clinical Trial

Following successful completion of the Phase 2 study, we conducted a Phase 3 trial (a multi-dose double-blind, placebo-controlled, multicenter trial protocol) that was designed to generate data to potentially support a BLA submission in the U.S. for NurOwn® in ALS. In October 2019, the clinical trial completed enrollment of an enriched patient population of rapid progressors based on superior outcomes observed in the Phase-2 pre-specified sub-group. The study is registered at www.clinicaltrials.gov (ClinicalTrials.gov Identifier: NCT03280056).

We announced top-line data from our Phase 3 ALS trial on November 17, 2020. Results from the trial showed that NurOwn® was generally well tolerated in the population of rapidly progressing ALS patients. However, the trial did not reach statistically significant results. No new safety concerns were identified. On February 9, 2021, we announced feedback from our Type-C Meeting with FDA to review specific aspects of our planned manufacturing modifications to support the development of a semi-automated commercial manufacturing process for NurOwn® (MSC-NTF cell). On February 22, 2021, we announced high-level FDA feedback on NurOwn® ALS clinical development program. The FDA concluded from their initial review that the clinical data provided at the time did not provide the threshold of substantial evidence that FDA seeks to support a BLA. In addition, the FDA advised that this recommendation did not preclude the Company from proceeding with a BLA submission.

Key findings from the trial were as follows (which include the update to the data published in Muscle & Nerve 65(3):291-302 on August 12, 2022):

● NurOwn® was generally well tolerated in this population of rapidly progressing ALS patients.

● While showing a numerical improvement in the treated group compared to placebo across the primary and key secondary efficacy endpoints, the trial did not reach statistically significant results.

● The primary efficacy endpoint, a responder analysis evaluating the proportion of participants who experienced at least a 1.25 points per month improvement in the post-treatment ALSFRS-R slope compared to pre-treatment, was powered on assumed treatment response rates of 35% on NurOwn® versus 15% on Placebo. These estimates were based on available historical clinical trial data and the NurOwn® Phase 2 data. The response definition for the primary endpoint was met by 32.6% of NurOwn® participants versus 27.7% for Placebo (p=0.453). Therefore, the trial met the expected ~35% NurOwn® treatment group efficacy response assumption, however the high rate of response in placebo participants exceeded the placebo response expected based on contemporary ALS trials.

● The secondary efficacy endpoint measuring average change in ALSFRS-R total score from baseline to Week 28, was -5.52 with NurOwn® versus -5.88 on Placebo, a difference of 0.36 (p= 0.693).

● In an important, pre-specified subgroup early in the disease course based on an ALSFRS-R baseline score of 35 or greater, NurOwn® demonstrated a clinically meaningful treatment response across the primary and key secondary endpoints and remained consistent with our pre-trial, data-derived assumptions. In this subgroup, there were 34.6% responders who met the primary endpoint definition on NurOwn® and 15.6% on Placebo (p=0.305), and the average change from baseline to week 28 in ALSFRS-R total score was -1.56 on NurOwn® and -3.65 on Placebo (p=0.050), an improvement of 2.09 ALSFRS-R points favoring NurOwn®.

● Additional sensitivity analyses have demonstrated consistent treatment effects with NurOwn® after accounting for the impact of the ALSFRS-R floor effect. Two methods include: (1) Total Score Threshold (“TST”), which included participants with ALSFRS-R scores >25; and (2) Item Level Threshold (“ITL”), which included participants with at least 2 of the 6 Fine and Gross Motor scale items with a score >2 at baseline. Applying the TST and ITL sensitivity analysis methods resulted in the exclusion of 23% (n=44) and 16% (n=30) of trial participants from analyses, respectively. Both the TST and ILT sensitivity analysis methods show that, after controlling for the impact of the ALSFRS-R floor effect, participants treated with NurOwn® had a higher rate of clinical response (primary endpoint) and less function lost across 28 weeks (secondary endpoint), compared to placebo. Additional post-hoc analyses published for the secondary endpoint (average change from baseline in ALSFRS-R), showed a statistically significant benefit following treatment with NurOwn® in all subgroups with ALSFRS-R baseline total score of at least 26 to 35 (p≤0.050).

● The NurOwn® Phase 3 trial enrolled a broad set of participants, including some with advanced ALS disease (ALSFRS-R≤25) at baseline, making this trial subject to the impact of floor effects of the ALSFRS-R and reduced ALSFRS-R

27

sensitivity. A post-hoc analysis was done using participants with baseline ALSFRS-R>25 for the primary endpoint and the % response for NurOwn® was 34.7% and 20.5% for Placebo, p=0.053. This analysis suggests a treatment effect with NurOwn® in participants with less advanced disease. CSF biomarker analyses confirmed that treatment with NurOwn® resulted in a statistically significant increase of neurotrophic factors (VEGF) and reduction in neurodegenerative (neurofilament) and neuroinflammatory biomarkers (MCP-1) that was not observed in the placebo treatment group.

● Pre-specified statistical modeling designed to predict clinical response with high sensitivity and specificity based on ALS biomarkers and ALS Function confirmed that NurOwn® treatment outcomes could be predicted by baseline ALS function as well as key CSF neurodegenerative and neuroinflammatory biomarkers. Additional analyses focused on the trajectory of biomarkers for the subgroups of participants with baseline ALSFRS-R scores >25 and ≤25, those most likely to be impacted by the floor effect of the scale, indicate that NurOwn® had similar biological effects on ALS participants regardless of the level of disease progression at baseline. Specifically, we observe decreases in neuroinflammatory and neurodegenerative markers and increases in neuroprotective markers in NurOwn® treated participants compared to placebo in both subgroups.

Decision to Submit BLA

New clinical analyses of NurOwn’s® Phase 3 clinical trial in ALS published August 12, 2022, led to a correction of data originally published in Muscle & Nerve in December 2021 and strengthened the Company’s original conclusions from the trial. The correction resulted in a statistically significant treatment difference (p=0.050) of more than 2 points for an important secondary endpoint, average change from baseline in ALSFRS-R, in the pre-specified efficacy subgroup of participants with a baseline score of at least 35. Analyses reported in the original publication utilized an efficacy model that unintentionally deviated from the trial’s pre-specified statistical analysis plan by erroneously incorporating interaction terms between the subgroup and treatment. The newly published results employ the efficacy model as pre-specified in the trial’s statistical analysis plan, correcting the analyses. The correction also relates to the other subgroup analyses published for this endpoint, demonstrating that all subgroups with ALSFRS-R baseline scores of greater than 26 to 35 showed a statistically significant benefit following treatment with NurOwn® (p≤0.050).

On August 15, 2022, we announced the decision to submit a BLA to the FDA for NurOwn® for the treatment of ALS. The BLA was filed on September 9, 2022. On November 10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA for NurOwn® for the treatment of ALS. The FDA informed us that the BLA is not sufficiently complete to enable a substantive review and that the FDA would therefore not file the BLA. The RTF letter contained a list of topics the FDA provided to BrainStorm as rationale for the BLA file being not sufficiently complete to enable a substantive review. According to the FDA, these reasons included one item related to the trial not meeting the standard for substantial evidence of effectiveness and Chemistry, Manufacturing and Controls (“CMC”) related items. The FDA indicated that we may request a Type A meeting to discuss the content of the RTF letter. On December 12, 2022, we announced the submission of a Type A meeting request with FDA to discuss the contents of the RTF letter previously issued by the FDA regarding the BLA for NurOwn® for the treatment of ALS. On December 27, 2022, we announced that the FDA granted a Type A meeting to discuss the contents of the RTF letter previously issued regarding our BLA for NurOwn® for the treatment of ALS. The Type A Meeting was held on January 11, 2023.

The perspective shared by the FDA review team reflected what was in the previously issued RTF letter. Conversations on the best pathway to resolve the outstanding questions that remained continued, following the Type A meeting. During these discussions, BrainStorm was presented with multiple options to return the BLA to regulatory review, which included the regulatory procedure to File over Protest. Additionally, within these discussions, FDA committed to review amendments that were filed to address items raised in the RTF letter. These discussions resulted in BrainStorm requesting the FDA to file our BLA over Protest, as this was the regulatory procedure that would allow us to reach an ADCOM in the shortest amount of time. BrainStorm notified the FDA on February 6, 2023 of our decision to request the FDA to file the NurOwn® BLA for ALS over Protest. We received confirmation from FDA that the BLA was re-filed on February 7, 2023.

We received the FDA Type A meeting minutes on February 9, 2023. We submitted an amendment to our BLA on March 7, 2023, in which we responded to the majority of the items included in the RTF letter. Written feedback was received on March 22, 2023, from the FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn® BLA for ALS. On June 6, 2023, we announced that the advisory committee meeting has been scheduled for September 27, 2023, and will be available for live streaming.

28

On September 22, 2023, we submitted an amendment to our BLA to revise the indication to NurOwn® for the treatment of mild to moderate ALS. On September 27, 2023 we announced that the Advisory Committee voted, with 17 voting no, one voting yes, and one abstention, that NurOwn® did not demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS.

On October 18, 2023 we announced that the FDA invited the Company to request an expedited face-to-face meeting to discuss the path forward for NurOwn® as a treatment for ALS. BrainStorm remains committed to the ALS Community and is actively exploring the next steps in support of NurOwn®, including publication of emerging clinical data and development of a protocol for an additional clinical study. On October 18, 2023 Brainstorm also announced that the BLA for NurOwn® would be withdrawn. The BLA was withdrawn on November 3, 2023. The decision to withdraw the BLA was coordinated with FDA and is viewed by FDA as a withdrawal without prejudice.

NurOwn® Clinical Manufacturing

We have developed a validated cryopreservation process for the long-term storage of MSC, that allows multiple doses of NurOwn® to be created from a single bone marrow harvest procedure in the multi-dose clinical trials and to avoid the need for patients to undergo repeated bone marrow aspiration. A validation study was conducted in 2017 comparing NurOwn® derived from fresh MSC to those derived from cryopreserved MSC. Company scientists were successful in showing that the MSC can be stored in the vapor phase of liquid nitrogen for prolonged periods of time, while maintaining their characteristics. Cryopreserved MSC are capable of differentiating into NurOwn®, similar to the NurOwn® derived from fresh MSC from the same patient/donor, prior to cryopreservation and maintain their key functional properties including immunomodulation and neurotrophic factor secretion.

We contracted with City of Hope’s Center for Biomedicine and Genetics to manufacture clinical supplies of NurOwn® adult stem cells for our Phase 3 clinical study. City of Hope supported the manufacturing of NurOwn® and placebo for the participants treated in the Phase 3 study. The Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute (“DFCI”) in Boston was also contracted to manufacture NurOwn® and placebo for our Phase 3 ALS clinical study participants and commenced manufacturing in October 2018. DFCI core manufacturing facility also supplied NurOwn® for our Phase 2 PMS study.

On October 22, 2020, we announced a partnership with Catalent, the leading global provider of advanced delivery technologies, to manufacture NurOwn®, which has been evaluated for the treatment of ALS in our Phase 3 clinical trial. Our technology transfer to Catalent Houston was successfully completed and enabled continuous supply of NurOwn® for the Expanded Access program.

We currently lease a cleanroom manufacturing facility in Tel Aviv at the Sourasky Medical Center to manufacture NurOwn®. This facility increase our capacity and expand our ability to manufacture and ship NurOwn® into the EU and local Israeli markets. On July 27, 2021, we announced the approval of GMP certification for a second production site in Israel from the MOH for three state-of-the-art cleanrooms leased by us at the Tel Aviv Sourasky Medical Center (“Sourasky Hospital”). The GMP approval confirms that the cleanrooms that are leased by Brainstorm are compliant with Israeli GMPs, which are aligned with European Union (“EU”) GMPs, and increases the Company’s capacity to manufacture and ship NurOwn® into the EU and local Israeli markets. These partnerships will ensure an ongoing cGMP clinical supply of NurOwn® and enable us to produce clinical trial material for the Phase 3b trial if funding is acquired to conduct it.

On December 7, 2021, we and Catalent announced completion of technology transfer for NurOwn® manufacturing at the Catalent’s cell therapy facility in Houston, Texas.

Catalent Houston manufactured NurOwn® for the second period of the Expanded Access Program. As of August 1, 2023, eight of the ten participants enrolled in the Expanded Access protocol completed the first period and received three doses of NurOwn®, and six of seven participants who entered Period 2 received three additional doses of NurOwn® that was manufactured at the Catalent facility.

Meetings with the FDA and 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 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 CBER and Dr. Janet Woodcock Director of the Center for Drug Evaluation and Research 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

29

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, we announced that we held a high-level meeting with the FDA to discuss potential NurOwn® regulatory pathways for approval in ALS. In the planned meeting with senior CBER leadership and several leading U.S. ALS experts, the FDA confirmed that the Phase 3 ALS trial was 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.

On February 9, 2021, we announced feedback on a Type-C Meeting with FDA on future NurOwn® manufacturing plans and to review specific aspects of our planned manufacturing modifications to support the development of a semi-automated commercial manufacturing process for NurOwn® (MSC-NTF cell). The meeting included a detailed review of the requirements for comparability testing to support future modifications along with geographic considerations in the sourcing of starting materials and future manufacturing production. We plan to incorporate feedback from the FDA meeting and our experience from Phase 3 manufacturing to finalize a robust comparability plan that could enable semiautomatic manufacturing to be introduced at the appropriate time in the future. We also plan to finalize the remaining steps necessary to proceed with running NurOwn® validation batches. The FDA also provided comments on several key aspects of the current manufacturing process.

On February 22, 2021, we announced high-level FDA feedback on NurOwn® ALS Clinical Development Program. The FDA concluded from their initial review that the current level of clinical data does not provide the threshold of substantial evidence that FDA is seeking to support a BLA. In addition, the FDA advised that this recommendation does not preclude the Company from proceeding with a BLA submission. Following extensive consultations with principal investigators, ALS experts, expert statisticians, regulatory advisors, and ALS advocacy groups to discuss the best path forward to provide NurOwn® for ALS patients, Brainstorm filed a BLA on September 9, 2022. On November 10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA, which informed us that the BLA was not sufficiently complete to enable a substantive review and that the FDA. The RTF letter contained a list of topics the FDA provided to BrainStorm as rationale for the BLA file being not sufficiently complete to enable a substantive review. According to the FDA, these reasons included one item related to the trial not meeting the standard for substantial evidence of effectiveness and CMC related items. The FDA indicated that we could request a Type A meeting to discuss the content of the RTF letter, and the Type A meeting was held on January 11, 2023. We notified the FDA on February 6, 2023 of our decision to request the FDA to file the NurOwn® BLA for ALS over Protest. Written feedback was received on March 22, 2023 from the FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn® BLA for ALS. We submitted an amendment to our BLA on March 7, 2023, in which we responded to the majority of the items included in the RTF letter.

On March 27, 2023, we announced that the FDA will hold an ADCOM to discuss the company’s BLA for NurOwn® for the treatment of ALS. Given the goal to proceed to an ADCOM as expeditiously as possible, BrainStorm requested that the CBER utilize the FDA’s File Over Protest procedure and has filed an amendment to the BLA which responds to most of the outstanding questions the FDA has posed. On June 6, 2023, we announced that the advisory committee meeting has been scheduled for September 27, 2023. On September 22, 2023, we submitted an amendment to our BLA to revise the indication to NurOwn® for the treatment of mild to moderate ALS. On September 27, 2023 we announced that the Advisory Committee voted, with 17 voting no, one voting yes, and one abstention, that NurOwn® did not demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS. On October 18, 2023, we announced that FDA invited the Company to request an expedited face-to-face meeting to discuss the path forward for NurOwn® as a treatment for ALS. BrainStorm remains committed to the ALS Community and is actively exploring the next steps in support of NurOwn®, including publication of emerging clinical data and development of a protocol for an additional clinical study. Brainstorm is withdrawing the BLA for NurOwn®. On October 18, 2023 Brainstorm announced that the BLA for NurOwn® would be withdrawn. The BLA was withdrawn on November 3, 2023. The decision to withdraw the BLA was coordinated with FDA and is viewed by FDA as a withdrawal without prejudice.

ALS Expanded Access Program

On December 14, 2020, we announced the NurOwn® Expanded Access Program (“EAP”) through which NurOwn® would be made available for ALS patients who completed all Phase 3 scheduled treatments and follow-up assessments and meet specific eligibility criteria.

The protocol for the EAP was developed in partnership with the FDA to provide access to NurOwn® for Phase 3 clinical trial participants who meet specific eligibility criteria. Initially, participants less severely affected by ALS, as measured by ALSFRS-R, were the first to receive treatment. This approach is informed by recently announced top-line data from the Company’s Phase 3 clinical trial. According

30

to the FDA, EAPs, alternatively known as “compassionate use” programs, provide a pathway for patients to receive an investigational medicine for a serious disease or condition outside of a clinical trial.

Through the EAP, the six clinical centers participating in the Phase 3 NurOwn® trial each had the opportunity to treat ALS participants who completed the trial. The selection of participants who were enrolled in the trial was independently done by the principal investigators at the participating clinical centers. These six centers are: University of California, Irvine; Cedars-Sinai Medical Center; California Pacific Medical Center; Massachusetts General Hospital; University of Massachusetts Medical School; and the Mayo Clinic. EAP treatment of ALS participants who have completed the Phase 3 clinical trial did not interfere with data or regulatory timelines. The Cell Manipulation Core Facility at the Dana Farber Cancer Institute manufactured the investigational therapy, assisted by on-site Brainstorm personnel.

In the course of 2021, 10 eligible patients that had completed the Phase 3 study, were enrolled in the EAP at the six participating medical centers to receive three additional doses of NurOwn® eight weeks apart. Eight patients completed the program receiving all three treatment doses. Two participants withdrew consent after receiving two treatment doses. There were no serious adverse events (SAEs) in the treated participants. On December 27, 2021, we announced plans for a dosing extension of NurOwn® for participants who completed the Expanded Access Protocol. The FDA recommended that Brainstorm submit an EAP protocol amendment to provide additional dosing for these participants. Under the original EAP protocol, participants who had completed the Phase 3 NurOwn® trial and who met specific eligibility criteria had the opportunity to receive three doses of NurOwn®. Under the amended EAP protocol, these eligible participants will receive up to three additional doses. Data collected from the original EAP treatments informed the decision to move forward with additional doses for participants who completed it. As of December 31, 2022, eight participants have completed treatment with NurOwn® manufactured at the Catalent Houston manufacturing site and all follow-up visits. As of August 1, 2023, eight of ten participants enrolled in the Expanded Access protocol completed Period 1 and received three doses of NurOwn®, and six of seven participants who entered Period 2 received three additional doses of NurOwn® that was manufactured at the Catalent facility. As of September 30, 2023, all study visits have been completed and the EAP has concluded with six participants receiving a total of 6 doses.

Patient Access Programs (ALS)

The Company, had worked collaboratively with the Tel Aviv Sourasky Medical Center (Ichilov Hospital), to treat ALS patients with NurOwn®, under the Israel Hospital Exemption (“HE”) regulatory pathway for Advanced Therapy Medicinal Products, which was adopted by the MOH from the EMA regulation. Between the first quarter of 2019 and the fourth quarter of 2020, the Company enrolled and treated 12 ALS patients with NurOwn®, under the HE pathway. Thus far, the Company has received $3.4 million in gross proceeds in connection with the treatment of the aforementioned patients, which is less than the operating expenses for the HE program.

NurOwn® in Progressive Multiple Sclerosis (PMS)

On December 15, 2018, the FDA approved the Company’s IND to conduct a Phase 2 open-label trial of repeated intrathecal administration of NurOwn® in PMS (www.clinicaltrials.gov Identifier NCT03799718). The study titled “A Phase 2, open-label, multicenter study to evaluate the safety and efficacy of repeated administration of NurOwn® (Autologous Mesenchymal Stem Cells Secreting Neurotrophic Factors; MSC-NTF cells) in participants with Progressive Multiple Sclerosis (PMS)” was designed to recruit 20 PMS participants at 5 leading U.S. Multiple Sclerosis centers.

On December 18, 2019, the clinical trial independent Data Safety Monitoring Board (“DSMB”) for the U.S. Phase 2 PMS study completed the first, pre-specified interim analysis, of safety outcomes for the first 9 participants enrolled in the study. After careful review of all available clinical trial data, the DSMB unanimously concluded “the study should continue as planned without any protocol modification”.

In August 2021, the DSMB for the U.S. Phase 2 PMS study issued an end-of-study statement concluding that, based on the data, the procedures and treatment involved in BCT-101-US were relatively safe and tolerable. Given that the study was “open-label” with no active comparator arm(s), it was not possible to evaluate efficacy, except through comparison to non-contemporaneous natural history data sets or to prior clinical trials of similar populations.

31

Phase 2 PMS Clinical Trial

On March 24, 2021, the Company announced positive top-line data in the Phase 2 study evaluating three repeated administrations of NurOwn®, each given 2 months apart, as a treatment for PMS. The 28-week open-label Phase 2 clinical trial enrolled 20 primary and secondary progressive MS patients based on the 2017 revised McDonald Criteria, ages 18-65, with baseline Expanded Disability Status Scale (“EDSS”) scores between 3-6.5, without evidence of relapse within 6 months of enrollment, able to walk 25 feet in 60 seconds or less and were permitted to be on a stable dose of disease modifying therapy. Of the 20 patients enrolled, 18 were treated and 16 (80%) completed the study. Two patients discontinued related to procedure-related AEs. There were no study deaths or AEs related to multiple sclerosis worsening. The mean age of study patients was 47, 56% were female, and mean baseline EDSS score was 5.4. The clinical trial compared clinical efficacy outcomes with a 48-patient matched clinical cohort from the Comprehensive Longitudinal Investigations in MS at the Brigham & Woman’s Hospital (“CLIMB”). MS Function and Cognition measures in the top-line results included the timed 25-foot walk (“T25FW”); 9-hole peg test (“9-HPT”); Low Contrast Letter Acuity (“LCLA”); Symbol Digit Modality Test (“SDMT”); and the 12 item MS Walking Scale (“MSWS-12”).

Key findings from the trial were as follows:

● Prespecified 25% improvements in the timed T25FW and 9-HPT (combined average) from baseline to 28 weeks were observed in 14% and 13% of NurOwn® treated patients, respectively, and improvement in 9-HPT (combined average) was observed in 0% of the pre-specified matched historical controls in the CLIMB registry.

● 38% of NurOwn® treated patients showed at least a 10-point improvement in the MSWS-12 from baseline to week 28, a patient reported outcome that evaluates walking function.

● 47% of NurOwn® treated patients showed at least an 8-letter improvement across 28 weeks in the LCLA binocular 1.25%, a visual function test. Additionally, 27% of NurOwn® treated patients showed at least an 8-letter improvement across 28 weeks in the LCLA binocular 2.5%,

● 67% of NurOwn® treated patients showed at least a 3-point improvement in the SDMT, a measure of cognitive processing.

● NurOwn® treated patients showed a mean improvement from baseline of 10% in T25FW and a 4.8% improvement from baseline on the 9-HPT dominant hand, compared to 1.8% and 1.4% worsening respectively in matched historical controls from the CLIMB registry.

● NurOwn® treated patients showed a 6% improvement from baseline in MSWS-12.

All results reported are based on observed data. CSF biomarkers were obtained at 3 consecutive time points, just prior to each intrathecal administration of NurOwn®. We observed increases in neuroprotective molecules (VEGF, HGF) and decreases in neuroinflammatory biomarkers (MCP-1, and Osteopontin).

Additionally, we completed secondary efficacy data and detailed CSF and blood biomarker analyses. We presented a detailed summary of the study outcomes at the 37th Congress of the ECTRIMS on October 14, 2021 and published our findings in the peer reviewed journal Multiple Sclerosis Journal on September 15, 2022. We are currently considering how best to advance NurOwn® as an innovative treatment option in PMS.

On November 14, 2019, we received a $495,330 grant from the National Multiple Sclerosis Society, through its Fast Forward program, to advance Brainstorm’s Phase 2 open-label, multicenter clinical trial of repeated intrathecal administration of NurOwn® in participants with progressive Multiple Sclerosis. As of June 30, 2023, we received $396,264 on account of the grant.

NurOwn® in Alzheimer’s Disease (AD)

On June 24, 2020, we announced a new clinical program focused on the development of NurOwn® as a treatment for AD. We are currently evaluating next steps based on emerging scientific insights and the changing regulatory landscape for AD following the recent FDA decision to grant accelerated approval of Aducanumab and pending regulatory reviews of other investigational anti-amyloid therapies.

32

While many Alzheimer’s therapies have focused on a single target such as tau or beta-amyloid, we believe NurOwn® has the capability to simultaneously target multiple relevant biological pathways and bring a comprehensive approach to this multifactorial disease. Importantly, NurOwn®’s mechanism of action may allow the therapy to enable synergistic combinations with anti-tau or anti-beta-amyloid treatments, further underscoring its potential to address critical unmet needs in AD. In such a complex disease, addressing inflammation and neuroprotection is an innovative approach and a first in the world for this technology.

Non-Dilutive Funding

In July 2017, we were awarded a grant in the amount of $15,912,390 from the California Institute for Regenerative Medicine (“CIRM”) to aid in funding the Company’s pivotal Phase 3 study of NurOwn®, for the treatment of ALS. We received $12,550,000 of the CIRM grant from 2017 2019: $9,050,000 from 2017 through 2018, and an additional $3,500,000 in 2019. On March 16, 2020, we received $2,200,000 from CIRM for achieving our pre-determined milestones. In July 2020, we received an additional $700,000 for making further progress in our Phase 3 study. On December 1, 2020, we received our final payment of $462,390. We have now received in full the total amount of the $15,912,390 grant funding awarded by CIRM. The grant does not bear a royalty payment commitment nor is the grant otherwise refundable.

On November 14, 2019, we were awarded a $495,330 grant from the National Multiple Sclerosis Society (NMSS), through its Fast Forward program, for serum and CSF biomarkers analysis in Brainstorm’s Phase 2 open-label, multicenter clinical trial of repeated intrathecal administration of NurOwn® in participants with PMS. As of September 30, 2023, we have received $396,264 out of the $495,330 awarded.

On April 3, 2020, we announced that our 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. The grant enables the Company to continue development of advanced cellular manufacturing capabilities, furthers development of MSC-NTF derived exosomes as a novel therapeutic platform, and will ultimately enable Brainstorm to expand the therapeutic pipeline in neurodegenerative disorders. As of September 30, 2023, we have received $1.3 million out of the $1.5 million awarded.

On June 9, 2020, we announced that The ALS Association and I AM ALS have awarded us a combined grant of $500,000 to support an ALS biomarker research study. The grant will be used to draw insights from data and samples collected from patients who participated in Brainstorm’s Phase 3 clinical trial and treated with NurOwn®, and to further the understanding of critical biomarkers associated with treatment response for people with ALS. As of September 30, 2023, we have received $400,000 out of $500,000 awarded.

Intellectual Property

A key element of our 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 27 granted patents, and 23 patent applications in the United States, Canada, Europe, Israel and Brazil, as well as in additional countries worldwide, including countries in the Far East and South America (in calculating the number of granted patents and patent applications, each European patent validated in multiple jurisdictions was counted as a single patent).

On February 18, 2020, the U.S. Patent and Trademark Office (“USPTO”) issued U.S. Patent No. 10,564,149 titled ‘Populations of Mesenchymal Stem Cells That Secrete Neurotrophic Factors’. The allowed claims cover a pharmaceutical composition for MSC-NTF cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived MSCs that secrete neurotrophic factors.

On June 3, 2020, the European Patent Office granted European patent No. 2880151 titled ‘Methods of Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors’. The allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).

On September 1, 2020, the Israeli Patent Office issued Israeli Patent No. 246943 titled ‘Method of Qualifying Cells’. The granted claims cover a method of qualifying whether a cell population is a suitable therapeutic for treating ALS and an isolated population of cells that secrete neurotrophic factors which are qualified useful as a therapeutic for treating ALS.

On September 16, 2020, the Company announced that the Japanese Patent Office has granted Brainstorm’s Japanese Patent No. 6,753,887, titled ‘Methods of Generating Mesenchymal Stem Cells Which Secrete Neurotrophic Factors’. The allowed claims cover a method of generating cells which secrete neurotrophic factors from MSCs derived from the bone marrow of a single donor. The said neurotrophic factors include BDNF, GDNF, HGF, and VEGF.

33

On December 15, 2020, the Canadian Patent office sealed Patent No. 2,937,305 titled ‘Pharmaceutical composition comprising bone-marrow derived mesenchymal stem cells’. The granted claims include a pharmaceutical composition for NurOwn® (MSC-NTF cells, Mesenchymal Stem Cells secreting Neurotrophic Factors), comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived MSCs that secrete neurotrophic factors.

On December 22, 2020 the USPTO issued U.S. Patent No. 10,869,899 titled ‘Isolated cells and populations comprising same for the treatment of CNS diseases’. Granted claims cover an isolated cell population secreting GDNF, a pharmaceutical composition comprising the isolated cells, and a device comprising the pharmaceutical composition, including a device that is adapted for administration of the isolated cell population into the spinal cord.

On February 19, 2021, the Hong Kong patent office sealed Patent No. HK1209453 titled ‘Methods of Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors’. Allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).

On November 30, 2021, the USPTO issued US Patent No. 11,185,572 titled ‘Mesenchymal stem cells for the treatment of CNS diseases’. The granted claims are for a method of treating a disease selected from the group consisting of Parkinson’s disease, ALS, Alzheimer’s disease, stroke and Huntington’s disease using MSC-NTF cells (NurOwn®).

On February 15, 2022, we announced that the Brazilian Patent Office granted patent application BR112015001435-6 titled ‘A method of generating cells which secrete Brain Derived Neurotrophic Factor (BDNF), Glial Derived Neurotrophic Factor (GDNF), Hepatocyte Growth Factor (HGF) and Vascular Endothelial Growth Factor (VEGF), wherein said cells do not Secrete Nerve Growth Factor (NGF)’. The granted claims cover a method of manufacturing MSC-NTF cells (NurOwn®).

On April 6, 2023, the European Patent Office accepted European Patent Application No.: 15710010.8 titled ‘Method of Qualifying cells’. Allowed claims include a method of qualifying whether a cell population is a suitable therapeutic for treating ALS and an isolated population of mesenchymal stem cells for use in treating ALS.

On June 2, 2023, the Australian Patent Office accepted Application No. 2019252987 titled “Cell-Type Specific Exosomes and Use Thereof”. Accepted claims include an isolated Exosomes population derived form MSC-NTF cells as well as a pharmaceutical composition for the treatment of neurodegenerative diseases.

On August 22, 2023 The Israel Patent Office accepted Application No. 277447 titled “Cell-Type Specific Exosomes and Use Thereof”. Accepted claims include an isolated Exosomes population derived form MSC-NTF cells as well as a pharmaceutical composition for the treatment of neurodegenerative diseases.

Patents protecting NurOwn® have been issued in the United States, Canada, Japan, Europe, Hong Kong, Brazil and Israel.

Recent Scientific and Industry Presentations

On November 7, 2022, Dr. Lindborg and Merit Cudkowicz, MD, MSC, Chief of Neurology at Massachusetts General Hospital, Julieanne Dorn Professor of Neurology at Harvard Medical School, and Director of the Sean M. Healey & AMG Center for ALS at Massachusetts General Hospital presented a scientific poster titled “Further Analysis of NurOwn® Phase 3 Data Based on Baseline ALSFRS-R Status Clarifies Treatment Outcomes” at the 2022 NEALS Meeting, held November 1-3, 2022 in Clearwater Beach, Florida. New post hoc analyses were presented that account for ALSFRS-R floor effects and add to the robust body of evidence supporting a clinically meaningful treatment effect with NurOwn® in ALS. To better understand the true effect of treatment with NurOwn® compared to placebo, two post-hoc sensitivity analysis methods were used to identify and remove participants from analyses that were most likely to be impacted by the floor effect. These methods were:(1) TST, which included participants with ALSFRS-R scores >25; and (2) ITL, which included participants with at least 2 of the 6 Fine and Gross Motor scale items with a score ≥2 at baseline. Applying the TST and ITL sensitivity analysis methods resulted in the exclusion of 23% (n=44) and 16% (n=30) of trial participants from analyses, respectively. Both the TST and ILT sensitivity analysis methods show that, after controlling for the impact of the ALSFRS-R floor effect, participants treated with NurOwn® had a higher rate of clinical response (primary endpoint) and less function lost across 28 weeks (secondary endpoint), compared to placebo. Additional post-hoc analyses published for the secondary endpoint (average change from baseline in ALSFRS-R), showed a statistically significant benefit following treatment with NurOwn® in all subgroups with ALSFRS-R baseline total score of at least 26 to 35 (p≤0.050). These analyses were included in a correction made to the Muscle and Nerve publication (December 2021) and were broadly discussed with the ALS community for the first time at the 2022 NEALS meeting.

34

On January 10, 2023, Mr. Lebovits and Dr. Lindborg jointly presented a corporate and clinical overview at the Biotech Showcase™ 2023 (Hilton San Francisco Union Square).

On January 20, 2023, Dr. Lindborg gave a presentation titled “The Debamestrocel (NurOwn®) Treatment Effect in Phase 3 as accessed by ALSFRS-R and CSF Biomarkers” at the 13^th Annual California ALS Research Summit in San Francisco, California. The presentation demonstrated that NurOwn® had significantly better outcomes in analyses controlling for the floor effect. Outcomes that aligned with historical data and power calculations of the trial.

On March 20, 2023, Dr. Lindborg presented a scientific poster titled “Measuring the rate of impairment in ALS patients using the Revised-ALS Functional Rating Scale: Key Insights into the Floor Effect of the Scale” at the 2023 Muscular Dystrophy Association Clinical and Scientific Conference in Dallas, Texas held March 19-22, 2023. The presentation showed that a floor effect was observed in the PRO-ACT database, and a pattern of a plateau in ALSFRS-R total score was accompanied by scale items of 0 suggesting measurement challenges in those with advanced ALS due to the floor effect of the ALSFRS-R in the NurOwn® Phase 3 trial and historical studies which are included in the PRO-ACT database. Analyses conducted in those not impacted by the floor effect at baseline of the NurOwn® Phase 3 trial revealed statistically significant, clinically meaningful effects with NurOwn® on the primary and key secondary endpoints.

On May 17 and 18, 2023, Dr. Lindborg and Mr. Trejo Diaz participated as invited expert speakers at the 2023 ALS Drug Development summit which was focused on transforming translational tools to accelerate future ALS approvals. Dr. Lindborg presented an invited talk entitled “Reviewing ALSFRS-R as the Established Endpoint for ALS Clinical trials”.

On June 21, 2023 Dr. Lindborg and Mr. Lebovits participated in a fireside chat at the Maxim Group Healthcare Virtual Conference.

During the week of July 7, 2023, Dr. Lindborg presented new biomarker data from the Phase 3 trial of its late-stage investigational ALS treatment, NurOwn® at the 2023 ALS and Related Motor Neuron Diseases Gordon Research Conference. These data show that treatment with NurOwn® significantly elevated markers of neuroprotection and lowered markers of neuroinflammation and neurodegeneration, including NfL over time compared to placebo in all trial participants. The presentation provides further evidence of the importance of NfL as a prognostic biomarker for ALS and a predictive biomarker following treatment with NurOwn®. A causal inference model demonstrated that NurOwn® driven NfL reductions were associated with better clinical outcomes.

Research and Development

We are actively engaged in research and development to evaluate the potential for clinical development of NurOwn® and MSC-NTF cells derived Exosomes in various neurodegenerative disorders, neurodegenerative eye disease and acute respiratory distress syndrome (“ARDS”). MSC-NTF cells derived Exosomes are an example of ongoing research in additional specialized derivative cell products. Exosomes are extracellular nano-vesicles (secreted by the cells) that carry various molecular components of their cell of origin, including nucleic acids, proteins and lipids. Exosomes can transfer molecules from one cell to another, thereby mediating cell-to-cell communication, ultimately regulating many cell processes, which are suitable for clinical applications in multiple neurodegenerative diseases. NurOwn® derived exosomes may possess unique features for the enhanced delivery of therapeutics to the brain, due to their ability to cross the blood brain barrier and to penetrate the brain and spinal cord.

The exosome research efforts are primarily focused on manufacturing of MSC-NTF exosomes from bone marrow derived MSC:

1. Developing and optimizing large scale cell culture processes using bioreactors, to generate exosomes.

2. Developing advanced scalable purification GMP methods that can be applied to commercial use.

3. Quantification, characterization of phenotype and exosome cargo.

4. Assessment of MSC-NTF exosomes potency and stability.

5. Establishment of a method for exosomes modification.

6. Preclinical experiments in neurodegenerative and lung injury models.

35

NurOwn® derived exosomes have the potential to treat ARDS due to their ability to penetrate deep tissues and decrease the inflammatory response. ARDS is a type of respiratory failure associated with widespread inflammation and lung damage mediated by dysregulated cytokine production and is one of the severe features of COVID-19.

MSC exosomes may be delivered intravenously or directly into the lungs via intratracheal administration have several practical advantages over cellular therapy including ease of storage, stability, formulation and low immunogenicity.

In a preclinical study, we evaluated MSCs and NurOwn® derived exosomes in an LPS ARDS-mouse model, relevant to severe acute lung injury. The results from the study showed that intratracheal administration of NurOwn® derived exosomes resulted in a statistically significant improvement in multiple lung parameters. These included the clinically relevant factors: functional lung recovery, reduction in pro-inflammatory cytokines and most importantly, attenuation of lung damage. Moreover, MSC-NTF cell derived exosomes exhibited a superior effect when compared to treatment with exosomes derived from naïve MSCs from the same donor. On January 20, 2021, we announced the peer-reviewed publication of this preclinical study in the journal Stem Cell and Research Therapy. The study, entitled “MSC-NTF (NurOwn®) exosomes: a novel therapeutic modality in the mouse LPS-induced ARDS model,” evaluated the use of NurOwn® (MSC-NTF cell) derived exosomes in a mouse model of ARDS.

A poster titled, “Therapeutic Benefits of MSC-NTF (NurOwn®) Exosomes in Acute Lung Injury Models” was presented on October 19, 2021 at the NYSCF 2021 Virtual Meeting, which was held on October 19-20, 2021. Results in two different acute lung injury models showed that the beneficial effects of intratracheal administration of Exo MSC-NTF (MSC-NTF derived exosomes) were more active than Exo MSC (MSC-derived Exosomes) in multiple parameters, including increase in blood oxygen saturation and reduction in lung pathology, inflammatory infiltration and levels of proinflammatory cytokines in bronchoalveolar lavage fluid, in addition to reduction of lung fibrosis in the Bleomycin model.

On May 4, 2022, we made a presentation titled “MSC-NTF derived small extracellular vesicles display superior macrophage immunomodulation compared with vesicles derived from naïve MSCs” at the International Society of Cell & Gene Therapy (“ISCT”) 2022 Meeting in San Francisco, California, May 4-7. The presentation highlighted results of a preclinical study undertaken to understand the mechanisms underlying the superior preclinical efficacy of Exo MSC-NTF versus Exo-MSC in acute lung injury models.

On May 25, 2021, we made a scientific presentation of NurOwn® Exosome preclinical ARDS data at the ISCT 2021 New Orleans Virtual Meeting demonstrating that intrathecal administration of NurOwn®-derived exosomes resulted in statistically significant improvements in multiple lung parameters in a mouse model of ARDS.

On May 26, 2022, we presented a poster titled “Therapeutic effect of MSC-NTF exosomes in experimental bleomycin-induced lung injury” at the ISEV 2022 Annual Meeting, Lyon France. Results from a preclinical study demonstrating superior outcomes of exosomes derived from MSC-NTF cells compared to exosomes derived from MSC cells were presented.

A poster titled “Exploring the therapeutics effects of small EVs derived from MSCs secreting neurotrophic factors (MSC-NTF) in lung injury in vivo models using in vitro immune and lung epithelial models” was presented at the “Extracellular Vesicles Friend and Foes” (EVFF) conference March 19-22, 2023 at the Weizmann Institute of Science, Israel.

On May 21, 2023, Haggai Kaspi, Ph.D. Brainstorm’s Pre-Clinical Research Manager, delivered an oral presentation titled “Small Extracellular Vesicles From MSC-NTF Cells Induce Significant Improvement in Inflammatory Lung Disease Models” at the American Thoracic Society conference in Washington, D.C.

The observed positive preclinical results suggest that intratracheal administration of Exo MSC-NTF may have clinical potential as a therapy for acute lung related pathologies and has the potential to modify physiological, pathological, and biochemical outcomes with greater activity than sEVs isolated from naïve MSCs.

For the completed multidose clinical studies in ALS and PMS, the Company has improved the efficiency of NurOwn® production and improved its stability, allowing manufacturing to take place at centralized clean room facilities from which NurOwn® is distributed to the clinical trial sites, where the cells are then administered to patients. The Company is also engaged in several research initiatives to further improve and scale-up manufacturing capacity and extend the shelf life of NurOwn®.

36

Corporate Information

We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 1325 Avenue of Americas, 28th Floor, New York, NY 10019, and our telephone number is (201) 488-0460. We also maintain an office in Petach Tikva, Israel. We maintain a website at http://www.brainstorm-cell.com. The information on our website is not incorporated into this Quarterly Report on Form 10-Q.

Results of Operations

For the period from inception (September 22, 2000) until September 30, 2023, we did not generate any revenues from operations. In addition, we incurred operating costs and expenses of $16,635,000 during the nine months ended September 30, 2023, compared to $19,907,000 during the nine months ended September 30, 2022. We incurred operating costs and expenses of $6,035,000 during the nine months ended September 30, 2023, compared to $6,841,000 during the nine months ended September 30, 2022.

Research and Development, net

Our business model calls for significant investments in research and development. Our research and development expenditures, net in the three months ended September 30, 2023 were $3,330,000, a decrease of $446,000 compared to $3,776,000 for the three months ended September 30, 2022.

This decrease is due to: (i) a decrease of $490,000 in costs related to the Phase 3 clinical trials from $1,575,000 in the three months ended September 30, 2022 to $1,085,000 for the three months ended September 30, 2023; (ii) and decrease of $617,000 in connection with payroll expenses and depreciation from $1,275,000 in the three months ended September 30, 2022 to $658,000 for the three months ended September 30, 2023. This decrease was partially offset by an increase of $661,000 for costs related to stock-based compensation expenses, patents, rent and other activities.

Our research and development expenditures, net for the nine months ended September 30, 2023 were $9,048,000, a decrease of $2,457,000 compared to $11,505,000 for the nine months ended September 30, 2022.

This decrease is due to: (i) a decrease of $2,422,000 in costs related to the Phase 3 clinical trials from $5,180,000 in the nine months ended September 30, 2022 to $2,758,000 for the nine months ended September 30, 2023; and (ii) a decrease of $1,221,000 in connection with payroll expenses, materials, depreciation and other activities from $5,795,000 in the nine months ended September 30, 2022 to $4,574,000 for the nine months ended September 30, 2023. This decrease was partially offset by an increase of $1,186,000 for costs related to stock-based compensation expenses, patents, rent and other.

General and Administrative

General and administrative expenses for the three months ended September 30, 2023 and 2022 were $2,705,000 and $3,065,000, respectively. The decrease in general and administrative expenses of $360,000 is primarily due to a decrease in payroll, stock-based compensation expenses, rent and other costs. This decrease was partially offset by an increase in consultants and stock management costs.

General and administrative expenses for the nine months ended September 30, 2023 and 2022 were $7,587,000 and $8,402,000, respectively. The decrease in general and administrative expenses of $815,000 is primarily due to a decrease of costs related to payroll, stock-based compensation expenses, PR activities, travel, rent and other activities. This decrease was partially offset by an increase in consultants and stock management costs.

Financial Expenses

Financial expenses for the three months ended September 30, 2023 were $121,000 compared to financial expenses of $17,000 for the three months ended September 30, 2022, as a result of interest earned on our cash, cash equivalents and short-term deposits and due to conversion exchange rates that was offset by financial expenses of $169 related to issuance costs of warrants that were classified as a liability.

Financial income for the nine months ended September 30, 2023 was $91,000 compared to financial income of $648,000 for the nine months ended September 30, 2022 as a result of interest earned on our cash, cash equivalents and short-term deposits and due to

37

conversion exchange rates that was offset by financial expenses of $169 related to issuance costs of warrants that were classified as a liability.

Net Loss

Net loss for the three months ended on September 30, 2023 was $1,226,000, compared to a net loss of $6,858,000 for the three months ended September 30, 2022. Net loss per share for the three months ended September 30, 2023 and 2022 was $0.03 and $0.19, respectively.

The weighted average number of shares of the Company’s common stock, $0.00005 par value per share (the “Common Stock”) used in computing basic and diluted net loss per share for the three months ended September 30, 2023 was 44,251,809, compared to 36,493,432 for the three months ended September 30, 2022.

Net loss for the nine months ended on September 30, 2023 was $11,614,000, compared to a net loss of $19,259,000 for the nine months ended September 30, 2022. Net loss per share for the nine months ended September 30, 2023 and 2022 was $0.29 and $0.53, respectively.

The weighted average number of shares of Common Stock used in computing basic and diluted net loss per share for the nine months ended September 30, 2023 was 40,255,502, compared to 36,472,372 for the nine months ended September 30, 2022.

Additional funding will be required to begin the commercialization efforts and to achieve a level of sales adequate to support the Company’s cost structure.

To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, additional public and private sales of its Common Stock and warrants, the exercise of warrants, the issuance of convertible promissory notes, sales of Common Stock via its August 9, 2021 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.

Management expects that the Company will continue to generate losses from the clinical development and regulatory activities, which will result in a negative cash flow from operating activity. The Company has recently completed regulatory review of the BLA for NurOwn for the treatment of ALS with the withdrawal of the BLA on November 3, 2023. A Phase 3b trial will be discussed with FDA and finalized. If the Company is not able to raise additional capital for these purposes, the Company may not be able to continue to function as a going concern. The Company’s consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.

Liquidity and Capital Resources

Since inception, the Company has financed its operations primarily through public and private sales of its Common Stock and warrants, the exercise of warrants, the issuance of convertible promissory notes, sales via the ATM programs and through various grants. At September 30, 2023 cash, cash equivalents and short-term bank deposits amounted to $1,418,000.

Net cash used in operating activities for the nine months ended September 30, 2023 was $17,173,000. Cash used for operating activities was primarily attributed to cost of clinical trials, rent of clean rooms and materials for clinical trials, payroll costs, rent, outside legal fee expenses and public relations expenses.

Net cash provided by investing activities for the nine months ended September 30, 2023 was $1,997,000 mainly representing net decrease in short-term interest-bearing bank deposits.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $15,626,000 out of which $8,529,000 come from sales of common stock under the August 9, 2021 ATM programs and $7,097,000 from sales of securities in a public offiering pursuant to the Securities Purchase Agreement entered into in July 2023.

On August 9, 2021, the Company entered into the New Distribution Agreement in connection with the August 9, 2021, ATM. Sales under the August 9, 2021, ATM are to be made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and the

38

Agents. During the nine months ended September 30, 2023, the Company sold 3,936,494 shares of Common Stock for gross proceeds of approximately $8,793,397 under the August 9, 2021, ATM.

At-the-market (ATM) Offerings:

On June 11, 2019, the Company entered into a distribution agreement with Raymond James & Associates, Inc. (“Raymond James”), pursuant to which the Company sold, through the Raymond James, shares of Common Stock having an aggregate offering amount of $20,000,000 (the “June 11, 2019 ATM”) in an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, by sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and Raymond James.

On March 6, 2020, the Company entered into a new distribution agreement with Raymond James (the “Agent”), pursuant to which the Company was able to 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 were 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. Under the March 6 2020, ATM, the Company sold an aggregate of 2,446,641 shares of Common Stock at an average price of $9.45 per share, raising gross proceeds of approximately $23.11 million.

On September 25, 2020, the Company entered into an Amended and Restated Distribution Agreement (the “Distribution Agreement”) with SVB Leerink LLC (“Leerink”) and Raymond James & Associates (together with Leerink, the “Agents”) pursuant to which the Company may sell from time to time, through the Agents, shares of Common Stock, having an aggregate offering price of up to $45,000,000, which aggregate amount includes amount unsold pursuant to the March 6, 2020, ATM (the “September 25, 2020 ATM”). Sales under the September 25, 2020 ATM are to be made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and the Agents. The Distribution Agreement amends and restates in its entirety the Company’s prior agreement with Raymond James in connection with the March 6, 2020 ATM. The Company previously sold 2,446,641 shares of Common Stock for gross proceeds of approximately $23.11 million of Common Stock under the March 6, 2020 ATM. During the quarter ended September 30, 2021, the Company did not sell any additional shares of its Common Stock pursuant to the September 25, 2020 ATM. Since inception and as of September 30, 2021, the Company has sold 4,721,282 shares of Common Stock for gross proceeds of approximately $29.1 million under the September 25, 2020 ATM.

The Company has no obligation under the September 25, 2020 ATM to sell any shares and may at any time suspend sales or terminate the September 25, 2020 ATM in accordance with its terms. Subject to the terms and conditions of the Distribution Agreement, the Agents will use their commercially reasonable efforts to sell on the Company’s behalf, from time to time consistent with its normal sales and trading practices, such Shares based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company has provided the Agents with customary indemnification rights, and the Agents will be entitled to a fixed commission of 3.0% of the aggregate gross proceeds from the Shares sold. The Distribution Agreement contains customary representations and warranties, and the Company is required to deliver customary closing documents and certificates in connection with sales of the Shares. Shares sold under the ATMs are issued pursuant to the Company’s existing Shelf Registration Statement, and the Prospectus Supplements to the Registration Statement filed June 11, 2019, March 6, 2020, and September 25, 2020, respectively.

On August 9, 2021, the Company entered into the New Distribution Agreement in connection with the August 9, 2021 ATM. Sales under the August 9, 2021 ATM are to be made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on The Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and the Agents. In connection with the New Distribution Agreement, the Company terminated the previous Distribution Agreement and the September 25, 2020 ATM. During the nine months ended September 30, 2023, the Company sold 3,936,494 shares of Common Stock for gross proceeds of approximately $8,793,397 under the August 9, 2021 ATM.

39

Registered Direct Offering:

On March 6, 2020, the Company entered into and closed a $10.0 million registered direct offering of 1,250,000 shares of Common Stock at a per share purchase price equal to $8.00. Purchaser also received a three-year warrant to purchase up to 250,000 shares of Common Stock at an exercise price of $15.00 per share.

On July 17, 2023, the Company entered into a Securities Purchase Agreement with the purchaser named therein, pursuant to which the Company agreed to sell, in a public offering (the “Offering”), an aggregate of 4,054,055 shares of Common Stock, together with accompanying warrants (the “Common Warrants”) to purchase 4,054,055 shares of Common Stock, at a purchase price of $1.85 per share and accompanying warrants for gross proceeds to the Company of approximately $7.5 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Offering closed on July 19, 2023. The Common Warrants are immediately exercisable, expire five years following the date of issuance and have an exercise price of $2.00 per share.

Recent Sales of Unregistered Securities:

Exercises of 2019 Warrants:

On August 2, 2019, the Company entered into Warrant Exercise Agreements with certain 2018 Warrant Holders (“2019 Warrant Holders”), pursuant to which holders were issued warrants to purchase an aggregate 842,000 shares of Common Stock (the “2019 Warrants”), at an exercise price of $7.00, with an expiration date of December 31, 2021 (the “2019 Warrants”).

Between July 15, 2020 and July 24, 2020, 2019 Warrant Holders exercised an aggregate of 620,000 shares of the 2019 Warrants (the “2019 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $4.34 million.

The 2019 Warrants have not been registered under the Securities Act, or state securities laws. The 2019 Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349). The issuance of the 2019 Exercised Shares and 2019 Warrants is exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from exercises for general corporate and working capital purposes.

With the warrant exercises in July 2020, the Company has reduced its outstanding warrants shares to non-affiliates by approximately 37% and reduced its overall warrants shares outstanding by approximately 19%. In total, 900,000 of the 4,724,868 Company warrant shares outstanding were exercised between July 15, 2020 and July 24, 2020. 2,266,667 of the remaining 3,824,868 outstanding warrants shares are owned by affiliates of the Company. As of September 30, 2023 the Company has no outstanding warrants.

We believe our existing cash will be insufficient to fund our anticipated operating cash requirements for at least twelve months following the date of this filing. We expect that we will continue to generate losses from the clinical development and regulatory activities, which will result in a negative cash flow from operating activity. The actual amount of cash that the Company will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of clinical trials for our product candidates along with cost to commercialize these product candidates.

Given the need to conduct a Phase 3b trial, we anticipate that we will need to raise substantial additional financing in the future to fund our operations. In order to meet these additional cash requirements, we may incur debt, license certain intellectual property, and seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of equity or convertible securities, these securities could have rights or preferences senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. Our future capital requirements will depend on many factors, including:

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

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

*the time and costs required to gain regulatory approvals;

40

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

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

*any product liability or other lawsuits related to our product candidates;

*the expenses needed to attract and retain skilled personnel;

*the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval;

*the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

*the general and administrative expenses related to being a public company;

*the effect of competition and market developments; and

*future pre-clinical and clinical trial results.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our consolidated financial statements and disclosures requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue and expenses during the reporting periods. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Accounting for stock-based compensation:

We grant equity-based awards under share-based compensation plans. We estimate the fair value of share-based payment awards using the Black-Scholes option valuation model. This fair value is then amortized over the requisite service periods of the awards. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. Share-based compensation expense is based on awards ultimately expected to vest, and therefore is reduced by expected forfeitures. Changes in assumptions used under the Black-Scholes option valuation model could materially affect our net loss and net loss per share.

Off Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

This information has been omitted as the Company qualifies as a smaller reporting company.

41

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in litigation relating to claims arising out of operations in the normal course of business, which we consider routine and incidental to our business. We currently are not a party to any material legal proceedings, the adverse outcome of which, in management’s opinion, would have a material adverse effect on our business, results of operation or financial condition, nor are we aware of any governmental proceedings involving potential monetary sanctions of $300,000 or more.

On November 1, 2023, a purported shareholder of the Company filed a putative securities class action complaint against the Company and certain of its officers, captioned Sporn v. Brainstorm Cell Therapeutics Inc., et al., Case No. 1:23-cv-09630 (the “Complaint”), in the United States District Court for the Southern District of New York (the “Securities Action”). The Securities Action alleges violations of Sections 10(b) of the Securities and Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder against all defendants and control person violations of Section 20(a) against the individual defendants, relating to NurOwn for the treatment of ALS, the Company’s submissions to and communications with the FDA in support of the approval of NurOwn for the treatment of ALS, and the prospects of future approval of NurOwn by the FDA. The Securities Action seeks, among other things, damages in connection with an allegedly inflated stock price between August 15, 2022 and September 27, 2023, as well as attorneys’ fees and costs. The Company intends to vigorously defend against the lawsuit.

Item 1A. Risk Factors.

Other than the additional risk factor[s] below, there have not been any material changes from the risk factors previously disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in this Quarterly Report on Form 10-Q, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations, our financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity

42

problems. For example, on March 10 and March 12, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank (“SVB”), and Signature Bank and Silvergate Capital Corp. (“Silvergate Capital”), respectively, after each bank was unable to continue their operations. Since then, additional financial institutions have experienced similar failures and have been placed into receivership. It is possible that other banks will face similar difficulty in the future. These events exposed vulnerabilities in the banking sector, including legal uncertainties, significant volatility and contagion risk, and caused market prices of regional bank stocks to plummet.

Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

We currently have no exposure to SVB, Signature Bank, Silvergate Capital, or any other banks in financial difficulty; however, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened. While it is not possible at this time to predict the extent of the impact that high market volatility and instability of the banking sector could have on economic activity and our business in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.

Significant parts of our operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military conditions in Israel.

We have substantial operations in Israel, including our research and development facilities and our manufacturing facilities at Tel Aviv Sourasky Medical Center (Ichilov Hospital), that may be influenced by regional instability, political instability and extreme military tension. Accordingly, political, economic and military conditions in Israel and the surrounding region could directly affect our business. Any armed conflicts, political instability, terrorism, cyberattacks or any other hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could affect adversely our operations.

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between Israel and Hezbollah in Lebanon, may escalate in the future into a greater regional conflict.

Prior to the Hamas attack in October 2023, the Israeli government pursued extensive changes to Israel’s judicial system. Recently, the Israeli Parliament has enacted an amendment to one of the Basic Laws, narrowing significantly the authority of Israeli courts to apply the “reasonableness” standard of review to acts and omissions of the government and its ministries. These developments have sparked an extensive on-going political debate. In response to the foregoing developments, many individuals, organizations and institutions, both within and outside of Israel, have been voicing concerns that such changes may negatively impact the business environment in Israel, reflected, among other things, in reluctance of foreign investors to invest or transact business in Israel and resulting, among other things, in currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions. It is currently unknown to what extent the planned changes in the judicial system will be further promoted nor can it currently be predicted how the recent enactment will affect the Israeli economy and how investors will assess the impact of these changes on it. To the extent that any of the negative developments stated above occur or become more severe, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.

Ongoing and revived hostilities or other Israeli political or economic factors, could prevent or delay shipments of our products, harm our operations and product development and cause any future sales to decrease. In the event that hostilities disrupt the ongoing operation

43

of our facilities or the airports and seaports on which we depend to import and export our supplies and products, our operations may be materially adverse affected.

If we fail to regain compliance with the continued listing requirements of Nasdaq, our common stock may be delisted and the price and liquidity of our common stock may be negatively impacted.

On November 1, 2023, we received a letter from the listing qualifications department staff (the “Staff”) of Nasdaq Stock Market (“Nasdaq”) indicating that we are not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have an initial compliance period of 180 calendar days from the date of the letter, or until April 29, 2024, to regain compliance with respect to the Bid Price Requirement. To regain compliance with the Bid Price Requirement, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during the initial compliance period. In accordance with Nasdaq Listing Rule 5810(c)(3)(A)(ii), we may be eligible for an additional 180-day compliance period to demonstrate compliance with the Bid Price Requirement, subject to certain conditions.

On November 6, 2023, we received a letter from the Staff notifying us that from September 25, 2023 to November 3, 2023, our Market Value of Listed Securities (“MVLS”) was below the minimum of $35 million for continued listing on The Nasdaq Capital Market pursuant to Nasdaq listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have a compliance period of 180 calendar days from receipt of this letter, or until May 6, 2024, to regain compliance with respect to the MVLS Requirement. To regain compliance with the MVLS Requirement, our MVLS must close at $35 million or more for a minimum of ten consecutive business days during the compliance period.

These letters had no immediate effect on the listing of the Common Stock on the Nasdaq Capital Market, and the Common Stock will continue to trade on The Nasdaq Capital Market under the symbol “BCLI.” However, if we do not regain compliance with the relevant listing requirement during the applicable compliance period, Nasdaq will notify us in writing of its determination to delist the Common Stock, at which point we would have an opportunity to appeal the delisting determination. However, there can be no assurance that, if we receive a delisting notice from the Staff and appeals the delisting determination, such appeal would be successful.

We intend to actively monitor the closing bid price of the Common Stock and MVLS and will take all reasonable measures available to us to regain compliance with the Bid Price Requirement and the MVLS Requirement. There can be no assurance that we will be able to regain compliance with these listing requirements or otherwise maintain compliance with any other listing requirements. Delisting from the Nasdaq market could make trading the Common Stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, stockholders may have a difficult time getting a quote for the sale or purchase of the Common Stock, the sale or purchase of the Common Stock would likely be made more difficult and the trading volume and liquidity of the Common Stock could decline. Delisting from Nasdaq could also result in negative publicity, could also make it more difficult for us to raise additional capital through alternative financing sources on terms acceptable to us, or at all, and may result in potential loss of confidence by investors, employees, and could result in fewer business development opportunities. We cannot assure you that the Common Stock, if delisted from Nasdaq, will be listed on another national securities exchange or quoted on an over-the counter quotation system.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

During the quarter ended September 30, 2023, we made no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors, as described in our most recent proxy statement.

44

Item 6. Exhibits.

The following documents are filed as exhibits to this report:

			Incorporated by Reference Herein
Exhibit Number	Description	Filed (or Furnished) with this Form 10-Q	Form	Exhibit & File No.	Date Filed
3.1	Certificate of Incorporation of Brainstorm Cell Therapeutics Inc.		Definitive Schedule 14A	Appendix B File No. 333-61610	November 20, 2006
3.2	Certificate of Amendment of Certificate of Incorporation of Brainstorm Cell Therapeutics Inc., dated September 15, 2014.		Form 8-K	Exhibit 3.1 File No. 000-54365	September 16, 2014
3.3	Certificate of Amendment of Certificate of Incorporation of Brainstorm Cell Therapeutics Inc., dated August 31, 2015.		Form 8-K	Exhibit 3.1 File No. 001-366641	September 4, 2015
3.4	ByLaws of Brainstorm Cell Therapeutics Inc.		Definitive Schedule 14A	Appendix C File No. 333-61610	November 20, 2006
3.5	Amendment No. 1 to ByLaws of Brainstorm Cell Therapeutics Inc., dated as of March 21, 2007.		Form 8-K	Exhibit 3.1 File No. 333-61610	March 27, 2007
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.3	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	‡
32.2	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	‡
32.3	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	‡
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	*
101.SCH	Inline XBRL Taxonomy Extension Schema Document	*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	*
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	*

*Filed herewith

‡Furnished herewith

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BRAINSTORM CELL THERAPEUTICS INC.
Date: November 14, 2023	By:	/s/ Chaim Lebovits
		Name: Chaim Lebovits
		Title: Co-Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Stacy Lindborg
		Name: Stacy Lindborg
		Title: Co-Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Alla Patlis
		Name: Alla Patlis
		Title: Controller, Interim Chief Financial Officer (Principal Financial Officer)

46