Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the related notes that appear elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. For further information regarding forward-looking statements, please refer to the “Special Note Regarding Forward-Looking Statements” at the beginning of Part I of this Annual Report on Form 10-K.

Company Overview

We are a leading biotechnology company engaged in the development of best-in-class autologous cellular therapies derived from a patient’s own bone marrow cells for the treatment of neurodegenerative diseases. We hold the rights to clinical development and commercialization of the NurOwn® technology platform through an exclusive, worldwide licensing agreement (see details herein). NurOwn® has received Fast Track designation from the FDA in ALS and has additionally been granted Orphan Drug Status by the FDA and the EMA. For more information, visit our website at www.brainstorm-cell.com.

We are committed to bring innovative central nervous system (“CNS”) adult stem cell therapies to the market to improve the lives of patients with debilitating neurodegenerative diseases. As a leader in CNS regenerative cellular medicines, we are leveraging NurOwn®, its proprietary autologous mesenchymal stem cell platform technology, a strong and expanded intellectual property portfolio, as well as manufacturing and commercialization capabilities, to address growing unmet medical needs across a broad range of neurodegenerative disorders, such as ALS, PMS, AD and other neurodegenerative diseases. NurOwn® uses proprietary cell culture conditions to induce MSCs to secrete high levels of multiple neurotrophic factors to modulate neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and improve neurological function.

Results of Operations

For the period from inception (September 22, 2000) until December 31, 2020, we did not generate any revenues from operations. In addition, we incurred operating costs and expenses of approximately $31,811,000 during the year ended December 31, 2020.

Research and Development, net

Our business model calls for significant investments in research and development. Our research and development expenditures, net in the year ended December 31, 2020 were $22,329,000, an increase of $5,125,000 compared to $17,204,000 for the year ended December 31, 2019.

This increase is due to (i) an increase of $2,135,000 in connection with materials, consultants, depreciation, payroll and stock-based compensation expenses and other activities; (ii) a decrease of $1,481,000 received in connection with the treatment of patients under the hospital exemption regulatory pathway; (iii) a decrease of $2,576,000 in participation of the Israel Innovation Authority (“IIA”) and CIRM in 2020, under various awarded grants and (iv) an increase of $269,000 for costs related to travel, patents and other costs. This increase was partially offset by a decrease of $1,336,000 in connection with the Phase 3 Clinical Trial. Excluding participation from IIA

Table of Contents

and CIRM under the grants and proceeds received under the hospital exemption regulatory pathway, research and development expenses decreased by $133,000 from $24,741,000 in 2019 to $24,608,000 in 2020.

General and Administrative

General and administrative expenses for the years ended December 31, 2020 and 2019 were $9,355,000 and $5,797,000, respectively. The increase of $3,558,000 in general and administrative expenses is mainly due to: (i) an increase of $2,611,000 in payroll and stock-based compensation expenses; (ii) an increase of $1,031,000 in the rent, the costs of our stock costs, consultants, costs of our investor relations and public relations activities and various other expenses. This increase was partially offset by a decrease of $84,000 in travel costs.

Financial Expenses

Financial expense for the year ended December 31, 2020 was $127,000 as compared to financial expense of $252,000 for the year ended December 31, 2019 as a result of the adoption of the Accounting Standard Update ASU 2016-02 “Leases” and due to interest earned on our cash, cash equivalents and short-term deposits.

Net Loss

Net loss for the year ended December 31, 2020 was $31,811,000, as compared to a net loss of $23,253,000 for the year ended December 31, 2019. Net loss per share for the year ended December 31, 2020 and December 31, 2019 was $1.07 and $1.06, respectively.

The weighted average number of shares of Common Stock used in computing basic and diluted net loss per share for the year ended December 31, 2020 was 29,848,217 compared to 21,906,257 for the year ended December 31, 2019.

The increase in the weighted average number of shares of Common Stock used in computing basic loss per share for the year ended December 31, 2020 was due to: (i) the issuance of shares to employees and directors, (ii) issuance and sale of shares of Common Stock pursuant to the Distribution Agreement and (iii) the exercise of options and warrants.

Since its inception, the Company has devoted substantially all of its efforts to research and development. The Company is still in its development and clinical stage and has not yet generated revenues. The extent of the Company's future operating losses and the timing of becoming profitable are uncertain.

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 September 25, 2020 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 COVID-19 pandemic may continue to adversely disrupt the Company's operations, including the ability to complete the ongoing clinical trials and may have other adverse effects on Company's business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on Company's business, operations and ability to raise capital.

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 its Phase 3 ALS clinical trial. The Company currently has sufficient cash to complete its ongoing Phase 2 PMS and Phase 2 AD clinical trials. Over the longer term, if the Company is granted a BLA approval, additional capital raise will be needed in connection with strategic partnerships and to commercialize Nurown® for ALS, and to conduct additional trials for other indications. If the Company is not able to raise additional capital for these purposes, management may need to slow the pace of commercialization or the Company may not be able to continue

Table of Contents

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 December 31, 2020 cash, cash equivalents and short-term bank deposits amounted to $41,936,000.

Net cash used in operating activities for the year ended December 31, 2020 was $35,193,000. 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 used in investing activities for the year ended December 31, 2020 was $4,452,000 representing primarily a net decrease in short-term deposits and purchase of property and equipment.

Net cash provided by financing activities for the year ended December 31, 2020 was $76,938,000 from the exercises of warrants during the year, issuance of new warrants, sales of common stock under March 6, 2020 registered direct offering and sales of common stock under the June 11, 2019 ATM, March 6, 2020 ATM and September 25, 2020 ATM programs.

On June 8, 2018, we filed a shelf registration statement on Form S-3 (File No. 333-225517) (the “Shelf Registration Statement”), which was declared effective by the SEC on June 29, 2018, relating to Common Stock, warrants and units that we may sell from time to time in one or more offerings, up to a total dollar amount of $100,000,000. Other than the supplements filed on June 11, 2019, March 6, 2020 and on September 25, 2020 in connection with the ATM offerings discussed below, and the prospectus supplement filed on March 6, 2020 in connection with the registered direct offering discussed below, we have not filed any supplemental prospectus defining particular terms of securities to be offered under the shelf registration statement.

At-the-market (ATM) Offerings:

On June 11, 2019, the Company entered into 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 the Agent. On February 21, 2020, the Company completed the sale of all remaining shares issuable under the June 11, 2019 ATM and exhausted its full ATM capacity. Under the June 11, 2019 ATM, the Company sold an aggregate of 4,141,569 shares of Common Stock at an average price of $4.83 per share, raising gross proceeds of approximately $20 million.

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 entered on March 6, 2020 (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 December 31,

Table of Contents

2020, the Company sold an aggregate of 3,564,385 shares of Common Stock pursuant to the September 25, 2020 ATM at an average price of $6.10 per share, raising gross proceeds of approximately $21.8 million.

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 Supplement to the Registration Statements filed June 11, 2019, March 6, 2020 and September 25, 2020, respectively.

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.

Recent Sales of Unregistered Securities:

Exercises of 2018 Amended Warrants: On June 6, 2018 the Company entered into Warrant Exercise Agreements with certain holders (“2018 Warrant Holders”), pursuant to which holders were issued warrants to purchase an aggregate 2,458,201 unregistered shares of Common Stock, at an exercise price of $9 per share, with an expiration date of December 31, 2020 (the “2018 Warrants”). In connection with the issuance of the 2019 Warrants (described below), certain 2018 Warrants were amended on August 2, 2019 to reduce the exercise price to $7.00 per share and to extend the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).

Between July 20, 2020 and July 24, 2020, 2018 Warrant Holders exercised an aggregate of 280,000 shares of the Amended 2018 Warrants (the “2018 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $1.96 million.

The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The 2018 Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The issuance of the 2018 Exercised Shares and 2018 Warrants was 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.

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.

Table of Contents

With the recent 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 and July 24, 2020. 2,266,667 of the remaining 3,824,868 outstanding warrants shares are owned by affiliates of the Company.

Our material cash needs for the next 12 months, assuming we do not expand our clinical trials beyond our ongoing Phase 2 PMS trials in the United States, and the Phase 2 AD trials in Europe will include (i) costs of the clinical trial in the U.S. and Europe, (ii) employee salaries, (iii) payments for rent and operation of the GMP facilities and manufacturing of NurOwn®, and (iv) fees to our consultants and legal advisors, patents, and fees for facilities to be used in our research and development.

We believe our existing cash will be sufficient to fund our anticipated operating cash requirements for at least twelve months following the date of this filing. We currently have sufficient cash to execute on our ongoing Phase 2 PMS and Phase 2 AD clinical trials and support our operating activities. 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. If we are granted a BLA approval, additional capital raise will be needed to commercialize NurOwn® for ALS, and to conduct additional trials that may be needed for other indications. 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.

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:

* the time and costs required to gain regulatory approvals;

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

* the expenses needed to attract and retain skilled personnel;

* 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.

The full extent to which the COVID 19 pandemic will directly or indirectly impact our business, results of operations, financial condition, liquidity and capital resources will depend on future developments that are highly uncertain and cannot be accurately predicted at this

Table of Contents

time, including new information that may emerge concerning COVID 19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. Our management team is actively monitoring this situation and the possible effects on our financial condition and liquidity.

Contractual Obligations and Commitments

The following is a table of contractual obligations and commitments as of December 31, 2020 (in thousands):

Payments Due by Period

Total Less than 1 year 1-3 years 3-5 years

Off-Balance Sheet Arrangement

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

Critical Accounting Policies and Estimates

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 Annual Report on Form 10-K 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.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not required.

Table of Contents

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

U.S. DOLLARS IN THOUSANDS

(Except share data and exercise prices)

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

U.S. DOLLARS IN THOUSANDS

(Except share data and exercise prices)

INDEX

Page

Report of Independent Registered Public Accounting Firm 64

Consolidated Balance Sheets 66

Consolidated Statements of Comprehensive Loss 67

Statements of Changes in Stockholders' Equity (deficit) 68

Consolidated Statements of Cash Flows 70

Notes to Consolidated Financial Statements 72

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

BRAINSTORM CELL THERAPEUTICS Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Brainstorm Cell Therapeutics Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019 and the related consolidated statements of comprehensive loss, shareholders' equity (deficit) and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Stock-Based Compensation to Employees and Directors – Stock Options — Refer to Note 11 to the financial statements

Critical Audit Matter Description

The Company issues various types of equity awards, including stock options. During the year ended December 31, 2020, the Company issued stock options for 590,866 shares and recorded stock option related compensation expense of $1.3 million. The Company estimated the fair value of these stock options granted using the Black-Scholes option pricing model. The option pricing model required the Company to make a number of assumptions, of which the most significant are expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements over the period equal to the expected option term, which was calculated using the simplified method.

Table of Contents

Auditing the Company's accounting for stock options required auditor judgment due to the subjectivity of assumptions used to estimate the fair value of stock options granted.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the stock-based compensation included the following, among others:

Brightman Almagor Zohar & Co.

Certified Public Accountants

A Firm in the Deloitte Global Network

Tel Aviv, Israel

February 4, 2021

We have served as the Company's auditor since 2008.

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

(Except share data)

December 31,

U.S. $ in thousands

ASSETS

Current Assets:

Cash and cash equivalents $ 37,829 $ 536

Short-term deposit (Note 9) 4,107 33

Other accounts receivable (Note 4) 304 2,359

Prepaid expenses and other current assets (Note 5) 1,002 432

Long-Term Assets:

Prepaid expenses and other long-term assets 26 32

Operating lease right of use asset (Note 6) 6,872 2,182

Property and Equipment, Net (Note 7) 1,119 960

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

Operating lease liability (Note 6) 2,655 1,263

Other accounts payable 1,900 714

Long-Term Liabilities:

Operating lease liability (Note 6) 4,562 1,103

Total long-term liabilities 4,562 1,103

Stockholders’ Equity (deficit):

Stock capital: (Note 11) 12 11

Treasury stocks (116) —

Total stockholders’ equity (deficit) 35,464 (12,223)

Total liabilities and stockholders’ equity $ 51,259 $ 6,534

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

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

U.S. dollars in thousands

(Except share data)

Year ended

December 31,

U.S. $ in thousands

Operating expenses:

Research and development, net (Note 12) $ 22,329 $ 17,204

General and administrative 9,355 5,797

Financial expenses, net 127 252

Basic and diluted net loss per share $ (1.07) $ (1.06)

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

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

U.S. dollars in thousands

(Except share data)

Additional Receipts on Total

Common stock paid-in account of Accumulated stockholders’

Number Amount capital shares deficit equity

5,908 (*) 25 — — 25

Exercise and reissuance of warrants 18,665 (*) 35 — — 35

* Represents an amount less than $1.

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

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

U.S. dollars in thousands

(Except share data)

Additional Total

Common stock paid-in Treasury Accumulated stockholders’

Number Amount capital stocks deficit equity (deficit)

Treasury stocks (25,000) * — (116) — (116)

Exercise of options 23,646 * 68 — — 68

* Represents an amount less than $1.

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

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

December 31,

U.S. $ in thousands

Cash flows from operating activities:

Shares and options granted to service providers — 25

Change in operating lease liability 161 184

Decrease in other accounts receivable and prepaid expenses 1,491 690

Increase(decrease) in accounts payables (9,260) 10,129

Increase in other accounts payable and accrued expenses 1,447 50

Total net cash used in operating activities $ (35,193) $ (11,247)

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

Table of Contents

BRAINSTORM CELL THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

Year ended

December 31,

U.S. $ in thousands

Cash flows from investing activities:

Purchase of property and equipment (378) (473)

Proceeds from (Investment in) short-term deposit (4,074) 6,089

Total net cash provided by (used in) investing activities $ (4,452) $ 5,616

Cash flows from financing activities:

Proceeds from exercise of options 68 35

Purchase of treasury stock (116) —

Proceeds from exercise of warrants 6,300 3,126

Total net cash provided by financing activities $ 76,938 $ 5,225

Increase (decrease) in cash and cash equivalents 37,293 (406)

Cash and cash equivalents at the beginning of the period $ 536 $ 942

Cash and cash equivalents at end of the period $ 37,829 $ 536

Supplemental schedule of non-cash transactions

Right of use lease asset and liability (5,857) (3,197)

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

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 1 - GENERAL

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

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 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 a number of 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.

The Company believes its existing cash will be sufficient to fund its anticipated operating cash requirements for at least twelve months following the date of this filing. The Company currently has sufficient cash to execute on its ongoing Phase 2 PMS and Phase 2 AD clinical trials and support its operating activities. 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. If the Company is granted a BLA approval, additional capital raise will be needed to commercialize Nurown® for ALS, and to conduct additional trials that may be needed for other indications. 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 its product candidates along with cost to commercialize these product candidates.

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 1 - GENERAL (Cont.)

In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on its operations and determined that there were no material adverse impacts on the Company’s results of operations and financial position as of December 31, 2020. These estimates may change, as new events occur and additional information is obtained.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

A. Basis of presentation:

The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) applied on a consistent basis.

B. 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.

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

C. Financial statements in U.S. dollars:

The functional currency of the Company is the U.S dollar ("dollar") since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. Part of the transactions of BCT is recorded in new Israeli shekels ("NIS"); however, a substantial portion of the costs are incurred in dollars or linked to the dollar. Accordingly, management has designated the dollar as the currency of BCT’s primary economic environment and thus it is their functional and reporting currency.

Transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been re-measured to dollars in accordance with the provisions of ASC 830-10 "Foreign Currency Translation". All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

D. Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Advanced Cell Therapies Ltd, BCT, Brainstorm UK and Brainstorm Cell Therapeutics Limited (Irish Company). Intercompany balances and transactions have been eliminated upon consolidation.

E. Cash and cash equivalents:

Cash and cash equivalents include cash in hand and short-term highly liquid investments that are readily convertible to cash with maturities of three months or less as of the date acquired and that are exposed to insignificant risk of change in value.

F. Short-term deposits:

Short-term deposits are deposits with an original maturity of more than three months from the date of investment and which do not meet the definition of cash equivalents.

G. Property and equipment:

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets.

The annual depreciation rates are as follows:

Office furniture and equipment 7

Computer software and electronic equipment 33

Laboratory equipment 15

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

H. Accrued post-employment benefit:

The majority of the Company's employees in Israel have agreed to Section 14 of Israel's Severance Pay Law, 5723-1963 (“Section 14”). Pursuant to Section 14, those of the Company's employees that are covered by this section are entitled only to an amount of severance pay equal to monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf by the Company. Payments in accordance with Section 14 release the Company from any future severance liabilities in respect of those employees. Neither severance pay liability nor severance pay funds under Section 14 for such employees is recorded on the Company's balance sheet.

I. Fair value of financial instruments:

The carrying values of cash and cash equivalents, other accounts receivable, other assets, trade payables and other accounts payable approximate their fair value due to the short-term maturity of these instruments.

J. Accounting for stock-based compensation:

In accordance with ASC 718-10 the Company estimates the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.

The Company recognizes compensation expense for the value of non-employee awards, which have graded vesting, based on the straight-line method over the requisite service period of each award.

The Company estimates the fair value of restricted shares based on the market price of the shares at the grant date and estimates the fair value of stock options granted using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are, expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements over the period, equal to the expected option term, which was calculated using the simplified method. The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.

The Company accounts for shares and warrant grants issued to non-employees using the guidance of ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” which expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.

K. Basic and diluted net loss per share:

Basic net loss per share is computed based on the weighted average number of shares outstanding during each year. Diluted net loss per share is computed based on the weighted average number of shares outstanding during each year, plus the dilutive potential of the Common Stock considered outstanding during the year, in accordance with ASC 260-10 "Earnings per Share".

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

K. Basic and diluted net loss per share: (Cont.)

All outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the years ended December 31, 2020 and December 31, 2019, since all such securities have an anti-dilutive effect.

L. Research and development expenses, net:

Research and development expenses are charged to the statement of operations as incurred.

Royalty-bearing grants from the Israel Innovation Authorities (“IIA”) and a non-dilutive, non-royalty-bearing grant from CIRM for funding approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from research and development expenses.

M. Income taxes:

The Company accounts for income taxes in accordance with ASC 740-10 "Accounting for Income Taxes". This Statement requires the use of the liability method of accounting for income taxes, whereby deferred tax asset and liability account balances are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and BCT provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

N. Lease accounting

The Company adopted ASC 842, leases effective January 1, 2019 using the modified retrospective approach. At the inception of an arrangement, the Company determines whether an arrangement is or contains a lease based on the facts and circumstances present in the arrangement. An arrangement is or contains a lease if the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Arrangements that are determined to be leases at inception are recognized in long-term ROU assets and short and long-term lease liabilities in the consolidated balance sheet at lease commencement. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future fixed lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company applies its incremental borrowing rate based on the economic environment at commencement date in determining the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases or payments are recognized on a straight-line basis over the lease term.

The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less.

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

O. Treasury Stock

The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to stockholders' equity.

P. Commitments and Contingencies

The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. As of December 31, 2020, the company recorded $600 for known commitments and contingencies.

Q. Recent Accounting Standards Updates Not Yet Effective:

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard will be effective for the Company's interim and annual periods beginning with the first quarter of fiscal 2021 and must be applied on a modified retrospective basis. This standard will not materially impact the Company's consolidated financial statements.

NOTE 3 - RESEARCH AND LICENSE AGREEMENT

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.

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 4 - OTHER ACCOUNTS RECEIVABLE

Composition:

December 31

U.S. $ in thousands

Grants receivable from CIRM (Note 10) — 2,200

Grants receivable from IIA 220 85

Government institutions and other 84 90

NOTE 5 - PREPAID EXPENSES

In November 2017, the Company has contracted with City of Hope's Center for Biomedicine and Genetics ("COH") to produce clinical supplies of NurOwn® adult stem cells for the Company’s ongoing Phase 3 clinical study. In 2017 the Company paid COH $2,665 advance payment. The advance was recorded as prepaid expense and is amortized over the term of the agreement. As of December 31, 2019, $276 were recorded as current prepaid expense. As of December 31, 2020, the prepaid expenses from COH advance payment were fully reduced.

As of December 31, 2020, prepaid expenses includes directors insurance of $984.

NOTE 6 - LEASES

On January 1, 2019 the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the modified retrospective approach for all lease arrangements at the beginning of the period of adoption. The Company leases facilities, clinical research rooms, and vehicles under operating leases.

As of December 31, 2020, the Company’s ROU assets and lease liabilities for operating leases totaled $6,872 and $7,217, respectively. The impact of adopting the new lease standard was not material to the Company’s condensed consolidated statement of operations for the periods presented.

As of December 31, 2020, and 2019, total right-of-use assets was approximately $6,872 and $2,182 and the operating lease liabilities for remaining long term lease was approximately $7,217 and $2,366, respectively. In the year ended December 31, 2020 and 2019, the Company recognized approximately $1,423 and $1,296, respectively in total lease costs for the leases. Variable lease costs for the year ended December 31, 2020 were immaterial.

As of December 31, 2020, the Company’s operating leases had a weighted average remaining lease term of 3.93 years and a weighted average discount rate of 7.00%. Future lease payments under operating leases as of December 31, 2020 were as follows:

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

Twelve Months

ended

December 31,

Cash payments for operating leases 1,423

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 6 - LEASES (Cont.)

Operating

Leases

Total future lease payments 8,290

Less imputed interest (1,073)

Total lease liability balance 7,217

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 7 - PROPERTY AND EQUIPMENT

Composition:

December 31

U.S. $ in thousands

Cost:

Office furniture and equipment 75 73

Computer software and electronic equipment 237 209

Leasehold improvements 811 795

Accumulated depreciation:

Office furniture and equipment 38 33

Computer software and electronic equipment 210 196

Laboratory equipment 964 777

Leasehold improvements 741 728

Depreciation expenses for the years ended December 31, 2020 and December 31, 2019 were $219 and $164, respectively.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

A. Commitments to pay royalties to the IIA:

BCT obtained from the Chief Scientist of the Israel Innovation Authority (“IIA”) grants for participation in research and development for the years 2007 through 2019, and, in return, BCT is obligated to pay royalties amounting to 3%-3.5% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of the dollar and bears interest of Libor per annum. Through the year ended December 31, 2020, total grants obtained amounted to $1,025.

B. In addition to the royalties which the Company is required to pay to Ramot on its Commercialization of the Licensed Product as described in Note 3 hereof, the Company has other financial obligations under the License Agreement, including without limitation, certain research funding commitments as well as a commitment to reimburse Ramot for all of its documented Licensed Product patent-related expenses. Pursuant to the License Agreement, in the event the Company elects not to reimburse Ramot for any specific patent expenses, the Company’s corresponding Commercialization rights will be terminated by Ramot. By way of example, if the Company elects, in its sole discretion, not to reimburse Ramot’s patent expenses which are incurred in a particular jurisdiction, the Company’s right to Commercialize the Licensed Product in the same jurisdiction may be terminated by Ramot. As of December 31, 2020, there are no outstanding obligations owed to Ramot in connection with the above.

NOTE 9 - SHORT TERM DEPOSITS

Short term investments on December 31, 2020 and December 31, 2019 include bank deposits bearing annual interest rates varying from 0.05% to 0.83%, with maturities of up to 4 months as of December 31, 2020 and 2019.

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 10 - GRANTS RECEIVABLE

In July 2017 the Company received an award in the amount of $15,912 from CIRM to aid in funding the Company’s Phase 3 study of NurOwn®, for the treatment of ALS. An aggregate amount of $3,362 and $12,550 related to the project was received through the year ended December 31, 2020 and December 31, 2019, respectively. As of December 31, 2020, there are no additional grants receivable from CIRM. The award does not bear a royalty payment commitment nor is the award otherwise refundable. $1,162 and $4,058 was recorded as participation by CIRM in research and development expenses during the year ended in December 31, 2020 and during the year ended December 31, 2019, respectively (see Note 12).

NOTE 11 - STOCK CAPITAL

The rights of Common Stock:

Holders of Common Stock have the right to receive notice to participate and vote in general meetings of the Company, the right to a share in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.

The Common Stock is publicly traded on the Nasdaq Capital Market under the symbol BCLI.

Private placements and public offerings:

The Company is party to a July 2, 2007 subscription agreement and related registration rights agreement and warrants, amended July 31, 2009, May 10, 2012, May 19, 2014 and November 2, 2017 (together as amended, the “ACCBT Documents”) with ACCBT Corp. (“ACCBT”), a company under the control of Mr. Chaim Lebovits, the Company’s President and Chief Executive Officer, pursuant to which, for an aggregate purchase price of approximately $5.0 million, the Company sold to ACCBT 1,920,461 shares of its Common Stock and warrants to purchase up to 2,016,666 shares of its Common Stock (the “ACCBT Warrants”). The ACCBT Warrants contain cashless exercise provisions, which permit the cashless exercise of up to 50% of the underlying shares of Common Stock. 672,222 of the ACCBT Warrants have an exercise price of $3 and the remainder has an exercise price of $4.35. All of the ACCBT Warrants are presently outstanding. The Company registered 1,920,461 shares of Common Stock and 2,016,666 shares of Common Stock underlying the ACCBT Warrants on registration statement No. 333-201705 dated January 26, 2015 pursuant to registration rights in the ACCBT Documents.

ACCBT has Board appointment rights, preemptive rights and consents rights pursuant to the ACCBT Documents. The foregoing description reflects the November 2, 2017 Warrant Amendment Agreement between the Company and ACCBT, pursuant to which the rights and privileges of the ACCBT Entities relating to the management of the Company were reduced, in exchange for a five (5) year extension of the expiration of the Company warrants held by the ACCBT Entities. Pursuant to the amendment, the ACCBT Documents were amended as follows: (i) the ACCBT Entities existing right to appoint 50.1% of the Board of Directors of the Company and its subsidiaries was reduced to 30%; (ii) the ACCBT Entities’ consent rights regarding Company matters pursuant to the ACCBT Documents were limited to transactions greater than $500,000 (previous to the amendment the consent right was for transactions of $25,000 or more); and (iii) the expiration date of each of the ACCBT Warrants was extended until November 5, 2022 (the previous expiration date was November 5, 2017).

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 11 - STOCK CAPITAL (Cont.)

2018 Warrant Exercise Agreement:

On June 6, 2018, the Company entered into a Warrant Exercise Agreement (the “2018 Warrant Exercise Agreement”) with certain holders (the “2018 Warrant Holders”) of warrants (the “2015 Warrants”) to purchase Common Stock. The 2015 Warrants were originally issued in the Company’s January 8, 2015 private placement. Pursuant to the 2018 Warrant Exercise Agreement, the 2018 Warrant Holders exercised their 2015 Warrants for a total of 2,458,201 shares of Common Stock at an amended exercise price of $5 per share. The warrant exercises generated gross cash proceeds to the Company of $12.3 million. In addition, the Company issued new warrants to the 2018 Warrant Holders to purchase an aggregate 2,458,201 unregistered shares of Common Stock, at an exercise price of $9.00, with an expiration date of December 31, 2020 (the “2018 Warrants”). In connection with the issuance of the 2019 Warrants (described below), certain 2018 Warrants were amended on August 2, 2019 to reduce the exercise price to $7.00 per share and to extend the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).

The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The shares issuable upon exercise of the Amended 2018 Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The exercised shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-201704). The issuance of the exercised shares and 2018 Warrants was 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.

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 11 - STOCK CAPITAL (Cont.)

Private placements and public offerings: (Cont.)

2019 Warrant Exercise Agreement:

On August 2, 2019, the Company entered into a Warrant Exercise Agreement which generated gross cash proceeds to the Company of approximately $3.3 million. Pursuant to the agreement, certain holders (the “2019 Warrant Holders”) of the 2018 Warrants agreed to exercise 842,000 shares of Common Stock of their 2018 Warrants, at an amended exercise price of $3.90 per share, and the Company agreed to issue new warrant shares to the Holders to purchase 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 2018 Warrants held by the 2019 Warrant Holders, to the extent not exercised, were also amended to reduce the exercise price to $7.00 per share and to extend the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).

The Amended 2018 Warrants and 2019 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The shares issuable upon exercise of the 2019 Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349), and the shares issuable upon exercise of the Amended 2018 Warrants have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The exercised shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995). The issuance of the exercised shares, Amended 2018 Warrants 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.

Warrants:

The following table sets forth the number, exercise price and expiration date of Company warrants outstanding as of December 31, 2020:

Outstanding

As Of

December 31, Exercise Exercisable

Issuance Date 2020 price Through

BRAINSTORM CELL THERAPEUTICS INC.

U.S. dollars in thousands

(Except share data and exercise prices)

Notes to Consolidated Financial Statements

Table of Contents

NOTE 11 - STOCK CAPITAL (Cont.)

At-the-market (ATM) Offering:

BCLI US Equity

BCLI · 10-K · period ended 2020-12-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BCLI US Equity☆

BCLI · 10-K · period ended 2020-12-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BCLI US Equity