10-Q: Brainstorm Cell Therapeutics Q3 2025: Delisting, Legal Battles, and Funding Challenges

Brainstorm Cell Therapeutics faces Nasdaq delisting, ongoing legal challenges, and significant capital needs despite progress in NurOwn's Phase 3b trial design for ALS.

Summary

• Brainstorm Cell Therapeutics reported a net loss of $2.106 million for the three months ended September 30, 2025, an improvement from a net loss of $2.708 million in the same period of 2024.
• For the nine months ended September 30, 2025, the net loss was $7.873 million, compared to $8.650 million for the prior year period.
• The company was delisted from The Nasdaq Capital Market on July 17, 2025, due to non-compliance with its minimum shareholder equity requirement and now trades on the OTCQB Venture Market.
• Cash and cash equivalents significantly decreased to $5,000 as of September 30, 2025, from $187,000 at December 31, 2024.
• Net cash used in operating activities for the nine months ended September 30, 2025, was $6.235 million, an improvement from $8.045 million in the prior year.
• The company secured $6.100 million in financing activities during the nine months, primarily from at-the-market (ATM) offerings, warrant exercises, and short-term loans.
• A material weakness in internal control over financial reporting related to short-term loan processes was identified, with a remediation plan adopted.
• The Biologics License Application (BLA) for NurOwn for ALS was withdrawn on November 3, 2023, following an FDA Advisory Committee vote against its effectiveness.
• The FDA has since granted a Special Protocol Assessment (SPA) agreement for the design of a planned Phase 3b trial for NurOwn in ALS (April 9, 2024) and alignment on Chemistry, Manufacturing, and Controls (CMC) aspects (June 26, 2024).
• The company is facing multiple legal proceedings, including a securities class action lawsuit and several derivative actions, alleging misstatements and breaches of fiduciary duty.
• A subsequent event on October 31, 2025, involved a new promissory note for $182,400 (net $155,000) with Vanquish Funding Group Inc., with potential for an additional $2 million in financing.
• The company has expanded its intellectual property portfolio to cover exosome-based technologies, with new patents granted in the U.S., Europe, Australia, and Israel.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including Nasdaq delisting, critically low cash reserves, and an explicit 'going concern' warning. While there's some progress on a new clinical trial design for NurOwn and IP expansion, these are overshadowed by significant regulatory setbacks, ongoing legal challenges, and a precarious financial state requiring continuous, dilutive capital raises. The stock is highly speculative with a very high risk of further value erosion.

Positives

• Reduced net loss for both the three-month ($2.106 million vs $2.708 million) and nine-month ($7.873 million vs $8.650 million) periods ended September 30, 2025, compared to the prior year.
• Operating loss also decreased for both periods, indicating improved operational efficiency.
• Received written agreement from the FDA under a Special Protocol Assessment (SPA) for the design of a Phase 3b trial of NurOwn in ALS, validating the clinical trial protocol and statistical analysis.
• Achieved alignment with the FDA on the Chemistry, Manufacturing, and Controls (CMC) aspects for the NurOwn Phase 3b clinical trial.
• Expanded intellectual property portfolio with new patents granted for exosome technology in the U.S., Europe, Australia, and Israel.
• Preclinical studies for NurOwn-derived exosomes show positive results in acute respiratory distress syndrome (ARDS) models.
• Successfully raised $6.100 million through financing activities during the nine months ended September 30, 2025, including ATM offerings and warrant exercises.
• A Citizen Petition requesting a new review of NurOwn data for ALS was acknowledged by the FDA, providing a critical opportunity to reaffirm its potential.

Negatives

• Delisted from The Nasdaq Capital Market on July 17, 2025, due to non-compliance with the minimum shareholder equity requirement, now trading on the OTCQB Venture Market.
• Cash and cash equivalents significantly declined to $5,000 as of September 30, 2025, from $187,000 at December 31, 2024.
• The Biologics License Application (BLA) for NurOwn for ALS was withdrawn on November 3, 2023, after an FDA Advisory Committee voted 17-1 against its effectiveness.
• Facing multiple legal proceedings, including a securities class action and derivative lawsuits, alleging misstatements and breaches of fiduciary duty.
• Identified a material weakness in internal control over financial reporting related to short-term loan processes.
• The August 9, 2021, At-the-Market (ATM) offering may no longer be available for use due to Nasdaq delisting, limiting future capital raising options.
• Incurred new unsecured indebtedness through a promissory note for $182,400 (net $155,000) with Vanquish Funding Group Inc. on October 31, 2025, bearing 12% interest.
• Significant shareholder dilution occurred, with weighted average shares outstanding increasing from 5,309,796 to 11,008,047 for the three months ended September 30, 2024 and 2025, respectively.
• The company has incurred operating losses since its inception and expects to continue to do so, raising substantial doubts about its ability to continue as a going concern.

Risks

• **Delisting Consequences**: Limited market quotations, reduced trading activity, limited analyst coverage, and decreased ability to issue additional securities or obtain financing due to trading on the OTCQB Venture Market.
• **State-Level Regulation**: Subject to individual state blue sky laws for securities offers and sales, increasing compliance requirements and potentially negatively impacting trading liquidity.
• **Macroeconomic Conditions**: Business may be impacted by fears concerning inflation, rising interest rates, volatile market conditions, and adverse developments in the financial services industry.
• **Unsecured Indebtedness**: Incurrence of unsecured short-term loans increases financial obligations and requires dedication of cash resources to principal and interest payments.
• **Material Weakness in Internal Controls**: Risk of material misstatements in financial statements if the identified material weakness in short-term loan controls is not remediated effectively.
• **Inability to Raise Additional Capital**: No assurance of obtaining additional equity or debt financing on acceptable terms, which is critical for funding operations, future clinical trials, and commercialization efforts.
• **Regulatory Approval Uncertainty**: Despite SPA agreement, there is no guarantee of successful Phase 3b trial outcomes or eventual regulatory approval for NurOwn.
• **Litigation Risks**: Ongoing securities class action and derivative lawsuits could result in significant monetary damages, legal fees, and reputational harm.
• **Product Development Risks**: Success of product development programs and research, and the ability of NurOwn to achieve broader acceptance as a treatment option for neurodegenerative diseases.
• **Intellectual Property Protection**: Ability to obtain patents that provide meaningful protection and protect intellectual property from infringement by third parties.

Future Outlook

The company expects to continue incurring operating losses for the near-term and generate negative cash flow from operating activities. Additional funding will be required to begin commercialization efforts, conduct a planned Phase 3b trial in ALS, and for future trials for other indications. Future capital requirements depend on clinical trial timing and design, regulatory approvals, licensing arrangements, intellectual property protection costs, commercialization expenses, and competition. Management plans to raise funds from outside potential investors, but there is no assurance such funding will be available or on favorable terms, raising substantial doubts about the company's ability to continue as a going concern.

Management Comments

• "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."
• "Our highest priority is to obtain regulatory approval of NurOwn for ALS."
• "We are also strategically focused on fully executing the clinical development of NurOwn in PMS, reviewing the optimal approach in AD and will consider the best course of action based on recent scientific and regulatory insights."
• "We believe that the ability to induce autologous adult MSCs into differentiated MSC-NTF cells makes NurOwn uniquely suited for the treatment of neurodegenerative diseases."
• "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 not able to raise additional capital for these purposes, the Company may not be able to continue to function as a going concern."

Industry Context

The company operates in the highly competitive and capital-intensive biotechnology sector, specifically focusing on neurodegenerative diseases like ALS, PMS, and AD. The challenges with FDA approval for NurOwn in ALS, including the advisory committee's negative vote and subsequent BLA withdrawal, highlight the stringent regulatory hurdles in drug development, especially for complex conditions. The shift to exosome-based technologies reflects a broader industry trend towards advanced cell and gene therapies and novel drug delivery mechanisms. The delisting from Nasdaq to OTCQB Venture Market is a significant setback, impacting visibility and access to capital, a common challenge for smaller biotech firms struggling with commercialization and funding. The acknowledgment of a Citizen Petition for NurOwn data review indicates continued patient advocacy and the potential for alternative regulatory pathways, though success is uncertain.

Comparison to Industry Standards

• The FDA Advisory Committee's overwhelming 'no' vote (17-1) on NurOwn's effectiveness for ALS is a significant negative outlier compared to successful Biologics License Application (BLA) submissions in the biotech industry, where strong efficacy data is paramount for approval.
• The company's financial position, with minimal cash ($5,000) and a substantial accumulated deficit ($234.5 million), is significantly weaker than many established biotech firms or even those in later-stage clinical development that typically maintain larger cash reserves to fund operations and trials.
• The delisting from Nasdaq to the OTCQB Venture Market is a clear indicator of failing to meet standard listing requirements for major exchanges, contrasting with the financial stability and market capitalization typically seen in publicly traded biotech companies.
• The reliance on continuous capital raises through at-the-market (ATM) offerings and promissory notes, coupled with a 'going concern' warning, is characteristic of early-stage or struggling biotech companies, rather than those nearing commercialization.
• The Special Protocol Assessment (SPA) agreement for a Phase 3b trial, while a positive step, follows a withdrawn BLA and a negative Advisory Committee meeting, indicating a more challenging and prolonged development path compared to therapies that achieve approval with a single pivotal Phase 3 trial.

Corporate Governance

Legal Proceedings

• **Securities Class Action**: Sporn v. Brainstorm Cell Therapeutics Inc., et al., filed November 1, 2023. Alleges violations of Sections 10(b) and 20(a) of the Exchange Act related to NurOwn for ALS, FDA communications, and approval prospects. The Court dismissed some claims (biomarker data, opinion on trial results, likelihood of FDA approval, insider trading) but allowed others to proceed (FDA views on trial design, prespecified subgroup analysis, floor effects, NurOwn safety profile).
• **Derivative Actions**: Four lawsuits consolidated into In Re Brainstorm Cell Therapeutics, Inc. Derivative Litigation, filed between February 14, 2024, and April 12, 2024. Brought against the company as nominal defendant and certain officers/directors. Allege state law claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, corporate waste, and Section 14(a) violations, related to internal controls and FDA communications for NurOwn. Substantive deadlines are stayed pending the court's decision on the motion to dismiss in the Securities Action.
• **Breach of Contract Lawsuit**: 3D Communications, LLC v. Brainstorm Cell Therapeutics, Inc., filed November 22, 2024. Alleges unpaid invoices for consulting services. Seeks monetary damages and attorneys' fees.

Related Party Transactions

• On November 4, 2024, the company entered into a loan agreement with a related party for a principal amount of $120,000, which was repaid in full on May 21, 2025.
• Except for transactions and balances related to loans and share-based compensation to officers and directors, no other related party transactions were disclosed for the nine months ended September 30, 2025.

Stakeholder Impact

• **Shareholders**: Significant dilution from ATM offerings and warrant exercises. Delisting from Nasdaq to OTCQB Venture Market likely reduces liquidity and share price, and increases regulatory compliance burden for brokers. Ongoing legal proceedings pose financial and reputational risks.
• **Employees**: Stock-based compensation plans are in place, but the company's 'going concern' warning and financial instability could impact employee morale and retention.
• **Customers/Patients (potential)**: The withdrawal of the BLA for NurOwn for ALS and the need for a new Phase 3b trial means a significant delay in potential access to the therapy. The Citizen Petition indicates continued patient community interest.
• **Creditors**: The company has unsecured indebtedness and a 'going concern' warning, which could increase risk for creditors. The new promissory note with Vanquish Funding Group Inc. adds to debt obligations.

Next Steps

• Conduct a planned Phase 3b registrational trial for NurOwn in ALS, following FDA SPA agreement and CMC alignment.
• Actively explore next steps for NurOwn in ALS, including publication of emerging clinical data and development of a protocol for an additional clinical study.
• Continue clinical development of NurOwn in Progressive Multiple Sclerosis (PMS).
• Review optimal approach for NurOwn in Alzheimer's Disease (AD) based on scientific and regulatory insights.
• Remediate the identified material weakness in internal control over financial reporting related to short-term loan processes.
• Vigorously defend against ongoing securities class action and derivative lawsuits, as well as the breach of contract lawsuit.
• Seek additional financing through various alternatives, including public and private sales of common stock and warrants, and convertible promissory notes, to fund operations and future development.
• Potentially receive additional tranches of financing up to $2 million from Vanquish Funding Group Inc. within the next twelve months.

Key Dates

Recommendation

The company faces severe financial and operational challenges. The delisting from Nasdaq, critically low cash reserves ($5,000), and an explicit 'going concern' warning indicate a high risk of financial instability. The withdrawal of the BLA for NurOwn for ALS after an overwhelming negative FDA Advisory Committee vote is a major setback, requiring a new, costly, and time-consuming Phase 3b trial. Ongoing securities class action and derivative lawsuits add significant legal and financial uncertainty. While there's some progress on trial design and IP, these positives are heavily outweighed by the immediate and long-term risks, including substantial dilution from continuous capital raises and limited market liquidity on the OTCQB. The stock is highly speculative with a very high risk of further value erosion.

Keywords

Brainstorm Cell Therapeutics, BCLI, NurOwn, ALS, Amyotrophic Lateral Sclerosis, Neurodegenerative Diseases, Cell Therapy, Biotechnology, SEC Filing, 10-Q, Financial Results, Nasdaq Delisting, OTCQB Venture Market, Clinical Trials, Phase 3b Trial, FDA, Special Protocol Assessment, Exosomes, Intellectual Property, Capital Raise, Legal Proceedings, Internal Controls, Going Concern, Progressive Multiple Sclerosis, Alzheimer's Disease