# EDGAR Filing Document

**Accession Number:** 0001783036
**File Stem:** 0001213900-25-097887
**Filing Date:** 2025-10
**Character Count:** 219229
**Document Hash:** a1e321184d0a161c076a66feb54b51b7
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-25-097887.hdr.sgml**: 20251010

**ACCESSION NUMBER**: 0001213900-25-097887

**CONFORMED SUBMISSION TYPE**: 6-K

**PUBLIC DOCUMENT COUNT**: 4

**CONFORMED PERIOD OF REPORT**: 20251009

**FILED AS OF DATE**: 20251010

**DATE AS OF CHANGE**: 20251009

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** NLS Pharmaceutics Ltd.
- **CENTRAL INDEX KEY:** 0001783036
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 000000000
- **STATE OF INCORPORATION:** V8
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 6-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39957
- **FILM NUMBER:** 251386152

**BUSINESS ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** THE CIRCLE 6
- **STREET 2:** 8058
- **CITY:** ZURICH
- **PROVINCE COUNTRY:** V8
- **BUSINESS PHONE:** 41-41-618-80-00

**MAIL ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** THE CIRCLE 6
- **STREET 2:** 8058
- **CITY:** ZURICH
- **PROVINCE COUNTRY:** V8

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**Form 6-K**

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of October 2025 (Report No. 2)

Commission file number: 001-39957

**<u>NLS PHARMACEUTICS LTD.</u>**

(Translation of registrant's name into English)

**The Circle 6**

**<u>8058 Zurich, Switzerland</u>**

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

**<u>CONTENTS</u>**

On November 4, 2024, NLS Pharmaceutics Ltd., or NLS, NLS Pharmaceutics (Israel) Ltd., an Israeli company and a wholly owned subsidiary of NLS (the "Merger Sub"), and Kadimastem Ltd., an Israeli publicly traded company limited by shares (TASE: KDST) ("Kadimastem"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which (i) Kadimastem will merge with and into Merger Sub, with Merger Sub as the surviving company (the "Merger"), and (ii) at the effective time of the Merger, each issued and outstanding ordinary share of Kadimastem, no par value, will be exchanged for and automatically converted into the right to receive from NLS that certain number of fully paid and nonassessable common shares of the NLS as calculated in accordance with the terms of the Merger Agreement.

This Report of Foreign Private Issuer on Form 6-K is being filed to provide (i) Kadimastem's Interim Condensed Financial Statements as of and for the six months ended June 30, 2025, which are attached hereto as Exhibit 99.1; (ii) Kadimastem's Audited Financial Statements as of and for the years ended December 31, 2024 and 2023, which are attached hereto as Exhibit 99.2; and (iii) NLS's Unaudited Pro Forma Condensed Combined Financial Statements as of and for the six months ended June 30, 2025, which are attached hereto as Exhibit 99.3.

**EXHIBIT INDEX**

---

| | |
|:---|:---|
| **Exhibit<br> Number** | **Description of Document** |
| 99.1 | [Unaudited Interim Condensed Financial Statements of Kadimastem Ltd. as of June 30, 2025 and December 31, 2024 and for the six months ended June 30, 2025 and 2024.](ea026072001ex99-1_nlspharma.htm) |
| 99.2 | [Audited Financial Statements of Kadimastem Ltd. as of and for the years ended December 31, 2024 and 2023.](ea026072001ex99-2_nlspharma.htm) |
| 99.3 | [Unaudited Pro Forma Condensed Combined Financial Statements of NLS Pharmaceutics Ltd. for the six months ended June 30, 2025.](ea026072001ex99-3_nlspharma.htm) |

---

**<u>SIGNATURES</u>**

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.

---

| | | | |
|:---|:---|:---|:---|
|  | **NLS Pharmaceutics Ltd.** | **NLS Pharmaceutics Ltd.** | **NLS Pharmaceutics Ltd.** |
| Date: October 9, 2025 | By: | /s/ Alexander Zwyer | /s/ Alexander Zwyer |
|  |  | Name: | Alexander Zwyer |
|  |  | Title: | Chief Executive Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

<u>Kadimastem Ltd.</u>

<u>Interim Condensed Financial Statements as of June 30, 2025</u>

Unaudited

<u>**Table of Contents**</u>

---

| | |
|:---|:---|
|  | <u>Page</u> |
| [Statements of Financial Position](#S_001) | 2 |
| [Statements of Profit or Loss and Other Comprehensive Loss](#S_002) | 3 |
| [Statements of Changes in Equity](#S_003) | 4-6 |
| [Statements of Cash Flows](#S_004) | 7-8 |
| [Notes to Interim Financial Statements](#S_005) | 9-14 |

---

- - - - - - - - - - - - - - - -

**KADIMASTEM LTD.**

**STATEMENTS OF FINANCIAL POSITION**

---

| | | | |
|:---|:---|:---|:---|
|  | June 30, | June 30, | |
|  | 2025 | 2024 | December 31,<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands | USD in thousands | USD in thousands |
| <u>CURRENT ASSETS</u> |  |  |  |
| Cash and cash equivalents | 299 | 548 | 650 |
| Pledged cash |  | 130 |  |
| Accounts receivable | 56 | 493 | 130 |
| Total current assets | 355 | 1171 | 780 |
| <u>NON-CURRENT ASSETS</u> |  |  |  |
| Right of use assets |  | 80 |  |
| Property and equipment | 106 | 179 | 123 |
| Total non-current assets | 106 | 259 | 123 |
| **Total assets** | 461 | 1430 | 903 |
| <u>CURRENT LIABILITIES</u> |  |  |  |
| Loans from a bank and others | 351 | 317 | 293 |
| Loans from interested parties | 1081 | 756 | 860 |
| Trade payables | 672 | 322 | 568 |
| Accounts payable | 660 | 164 | 605 |
| Current maturities of lease liabilities |  | 144 | (\*) |
| Convertible loan | 1115 | 743 | 1512 |
| Conversion component of convertible loan and warrants | 11663 | 1145 | 5061 |
| Total current liabilities | 15542 | 3591 | 8899 |
| <u>NON-CURRENT LIABILITIES</u> |  |  |  |
| Employee benefit liabilities | - | 6 | - |
| Total non-current liabilities | - | 6 | - |
| **Total liabilities** | 15542 | 3597 | 8899 |
| <u>EQUITY</u> |  |  |  |
| Share capital | 1324 | 1238 | 1238 |
| Share premium | 64847 | 62286 | 62560 |
| Warrants | 3301 | 1273 | 1273 |
| Reserve from share-based payment transactions | 918 | 546 | 452 |
| Reserve from transactions with controlling shareholders | 4303 | 4013 | 4105 |
| Foreign currency translation reserve | (2040) | (941) | (1094) |
| Accumulated deficit | (87734) | (70582) | (76530) |
| Total equity | (15081) | (2167) | (7996) |
| Total liabilities and equity | 461 | 1430 | 903 |

---

---

| | |
|:---|:---|
| (\*) | Less than $1. |

---

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

<u><u>August 31, 2025</u></u>       <br> Date of approval of the financial statements Ronen Twito<br> CEO and Executive Chairman of the Board Liora Oren<br> Director Uri Ben Or<br> Chief Finance Officer

**KADIMASTEM LTD.**

**STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS**

---

| | | | |
|:---|:---|:---|:---|
|  | Six months ended<br> June 30 | Six months ended<br> June 30 | |
|  | 2025 | 2024 | Year ended December 31,<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands <br>(except per share data) | USD in thousands <br>(except per share data) | USD in thousands <br>(except per share data) |
| Research and development expenses, net | 576 | 410 | 992 |
| General and administrative expenses | 685 | 376 | 793 |
| Other expenses (expenses for merger with NLS) | 101 | - | 269 |
| Operating loss | 1362 | 786 | 2054 |
| Finance income | (54) | (196) | (6) |
| Finance expenses related to derivative of conversion component of convertible loan and warrants and shareholder loans. | 9923 | 548 | 5044 |
| Other finance expenses | 24 | 133 | 93 |
| Finance expenses, net | 9893 | 485 | 5131 |
| Loss before tax benefit | 11255 | 1271 | 7185 |
| Tax benefit | (51) | (34 | (7) |
| Loss | 11204 | 1237 | 7178 |
| Other comprehensive loss net of tax effect: |  |  |  |
| <u>Amounts that will not be subsequently reclassified to profit or loss:</u> |  |  |  |
| Actuarial loss from remeasurement regarding defined benefit plans |  |  | (7) |
| Adjustments arising from translating financial statements from functional currency to presentation currency | (946) | 61 | (92) |
| Total other comprehensive loss | (946) | 61 | (99) |
| Total comprehensive loss | 12150 | 1176 | 7277 |
| Basic and diluted loss per share (in USD) | 2.81 | 0.3 | 1.71 |

---

(\*) Adjusted retroactively due to the reverse share split in 2024.

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

**KADIMASTEM LTD.**

**STATEMENTS OF CHANGES IN EQUITY**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Share<br> capital | Share<br> premium | Warrants | Reserve from<br> share-based<br> payment<br> transactions | Reserve from<br> transactions<br> with controlling<br> shareholders | Foreign<br> currency<br> translation<br> reserve | Accumulated<br> deficit | Total<br> equity |
|  | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands |
| Balance as of January 1, 2025 (audited) | 1238 | 62560 | 1273 | 452 | 4105 | (1094) | (76530) | (7996) |
| Loss |  |  |  |  |  |  | (11204) | (11204) |
| Other comprehensive loss | - | - | - | - | - | (946) |  | (946) |
| Total comprehensive loss |  |  |  |  |  | (946) | (11204) | (12150) |
| Ordinary Shares issued upon conversion of convertible loan | 86 | 2287 | 2028 |  |  |  |  | 4401 |
| Employee options expired |  | (-\*) |  | (-\*) |  |  |  |  |
| Shareholder transactions, net |  |  |  |  | 198 |  |  | 198 |
| Cost of share-based payment | - | - | - | 466 | - | - | - | 466 |
| Balance as of June 30, 2025 (unaudited) | 1324 | 64847 | 3301 | 918 | 4303 | (2040) | (87734) | (15081) |

---

---

| | |
|:---|:---|
| (\*) | Less than $1. |

---

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

**KADIMASTEM LTD.**

**STATEMENTS OF CHANGES IN EQUITY**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Share<br> capital | Share<br> premium | Warrants | Reserve from<br> share-based<br> payment<br> transactions | Reserve from<br> transactions<br> with controlling<br> shareholders | Foreign<br> currency<br> translation<br> reserve | Accumulated<br> deficit | Total<br> equity |
|  | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands |
| Balance as of January 1, 2024 (audited) | 1238 | 62286 | 1273 | 518 | 3830 | (1002) | (69345) | (1202) |
| Loss |  |  |  |  |  |  | (1237) | (1237) |
| Other comprehensive loss |  |  |  |  |  | 61 |  | 61 |
| Total comprehensive loss | - | - | - | - | - | 61 | (1237) | (1176) |
| Shareholder transactions, net |  |  |  |  | 183 |  |  | 183 |
| Cost of share-based payment | - | - | - | 28 | - | - | - | 28 |
| Balance as of June 30, 2024 (unaudited) | 1238 | 62286 | 1273 | 546 | 4013 | (941) | (70582) | (2167) |

---

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

**KADIMASTEM LTD.**

**STATEMENTS OF CHANGES IN EQUITY**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Share<br> capital | Share<br> premium | Warrants | Reserve from<br> share-based<br> payment<br> transactions | Reserve from<br> transactions<br> with controlling<br> shareholders | Foreign<br> currency<br> translation<br> reserve | Accumulated<br> deficit | Total<br> equity |
|  | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands | USD in thousands |
| Balance as of January 1, 2024 (audited) | 1238 | 62286 | 1273 | 518 | 3830 | (1002) | (69345) | (1202) |
| Loss |  |  |  |  |  |  | (7178) | (7178) |
| Other comprehensive loss | - | - | - | - | - | (92) | (7) | (99) |
| Total comprehensive loss |  |  |  |  |  | (92) | (7185) | (7277) |
| Employee options expired |  | 274 |  | (274) |  |  |  |  |
| Shareholder transactions, net |  |  |  |  | 275 |  |  | 275 |
| Cost of share-based payment | - | - | - | 208 | - | - | - | 208 |
| Balance as of December 31, 2024 (audited) | 1238 | 62560 | 1273 | 452 | 4105 | (1094) | (76530) | (7996) |

---

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

**KADIMASTEM LTD.**

**STATEMENTS OF CASH FLOWS**

---

| | | | |
|:---|:---|:---|:---|
|  | Six months ended<br> June 30, | Six months ended<br> June 30, | |
|  | 2025 | 2024 | Year ended December 31,<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands | USD in thousands | USD in thousands |
| <u>Cash flows from operating activities</u> |  |  |  |
| Loss | (11204) | (1237) | (7178) |
| Adjustments to reconcile loss to net cash used in operating activities: |  |  |  |
| Adjustments to profit or loss items: |  |  |  |
| Depreciation and amortization | 26 | 272 | 413 |
| Financing expenses, net | 9893 | 485 | 5131 |
| Tax benefit | (51) | (34) | (7) |
| Theoretical salary to shareholder | 28 | 65 | 130 |
| Cost of share-based payment | 467 | 29 | 208 |
| Change in employee benefit liabilities, net | - | 1 | (5) |
|  | 10363 | 818 | 5870 |
| Changes in assets and liabilities: |  |  |  |
| Decrease (increase) in accounts receivable | 79 | (59) | 321 |
| Increase (decrease) in trade payables | 104 | (195) | 36 |
| Increase (decrease) in accounts payable | 55 | (55) | 379 |
|  | 238 | (309) | 736 |
| Cash received (paid) during the period for: |  |  |  |
| Interest received (paid) | 1 | (36) | (133) |
| Net cash used in operating activities | (602) | (764) | (705) |
| <u>Cash flows from investing activities</u> |  |  |  |
| Purchase of property and equipment |  | (4) | (6) |
| Change in pledged cash | - | 35 | 167 |
| Net cash provided by investing activities | - | 31 | 161 |

---

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

**KADIMASTEM LTD.**

**STATEMENTS OF CASH FLOWS**

---

| | | | |
|:---|:---|:---|:---|
|  | Six months ended<br> June 30, | Six months ended<br> June 30, | |
|  | 2025 | 2024 | Year ended December 31,<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands | USD in thousands | USD in thousands |
| <u>Cash flows from financing activities</u> |  |  |  |
| Repayment of lease liability |  | (208) | (361) |
| Receipt of a loan from interested parties | 278 |  |  |
| Receipt of a convertible loan from shareholders | - | 458 | 450 |
| Net cash provided by financing activities | 278 | 250 | 89 |
| Exchange rate differences on balances of cash and cash equivalents | (27) | (115) | (41) |
| Decrease in cash and cash equivalents | (351) | (598) | (496) |
| Cash and cash equivalents at the beginning of the period | 650 | 1146 | 1146 |
| Cash and cash equivalents at the end of the period | 299 | 548 | 650 |
| Material non-cash transactions |  |  |  |
| Conversion of shareholder loans into equity | 4401 | - | - |

---

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

**KADIMASTEM LTD.**

**NOTES TO INTERIM FINANCIAL STATEMENTS**

**NOTE 1 - GENERAL**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Kadimastem Ltd. (the "Company") was incorporated in Israel
on October 6, 2008, and began its business activities on August 27, 2009. On June 6, 2013, the Company completed an initial public offering
of its shares on the Tel Aviv Stock Exchange ("TASE"). The Company's offices are located in Ness Ziona, Israel. The
Company is a bio-pharmaceutical company that develops industrial regenerative medicine therapies based on differentiated cells derived
from Human Embryonic Stem Cells (hESCs) to treat neuro-degenerative diseases such as ALS and Diabetes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. These financial statements have been prepared in a condensed format
as of June 30, 2025, and for the period of six months then ended ("interim financial statements"). These financial statements
should be read in conjunction with the Company's annual financial statements as of December 31, 2024, and for the year then ended and
accompanying notes ("annual financial statements").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. During the period of six months ended June 30, 2025, the Company incurred
a loss and had negative cash flows from operating activities of $11,204 thousand and $616 thousand, respectively. As of June 30, 2025,
the Company's shareholders' deficit, accumulated deficit, and negative working capital amounted to $15,081 thousand, $87,734 thousand,
and $15,187 thousand, respectively.

The Company's ability to continue its operations depends on raising resources to finance its operations. The Company plans to finance its operations through loans from investors and the sales of its equity securities, which include, but not limited to, (i) proceeds to be received from private placement transactions, (ii) proceeds to be received from public offerings on the TASE, (iii) issuance of rights to its current shareholders and (iv) completion of merger transaction following to Agreement of Merger and Plan of Reorganization (as amended, the "Merger Agreement") executed on November 5, 2024 with the NLS Pharmaceutics Ltd. ("NLS"), a Swiss company, whose shares are traded on the Nasdaq Capital Market (the "Nasdaq"), for a merger with the Company through a share exchange transaction. For more information regarding the merger transaction, see also Note 3F and Note 6A below.

However, there is no assurance as to the Company's ability to generate income or raise additional equity in the future, if at all.

These factors raise substantial doubt as to whether the Company will be able to continue as a going concern. The financial statements do not include any adjustments relating to the carrying amounts of assets or liabilities and their classification that might be necessary should the Company be unable to continue as a going concern.

**NOTE 2 - MATERIAL ACCOUNTING POLICIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Basis of presentation** 

The interim condensed financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34 "Interim Financial Reporting" and in accordance with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.

**KADIMASTEM LTD.**

**NOTES TO INTERIM FINANCIAL STATEMENTS**

**NOTE 3 - SIGNIFICANT EVENTS DURING THE REPORTING PERIOD**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Conversion of convertible loan into the Company's ordinary shares** 

Further to the matter discussed in Note 15 to the annual financial statements, on April 14, 2025, the Company received a written notice from Mr. Julien Ruggieri, a significant shareholder of the Company, regarding his decision to convert the outstanding principal amount of the convertible loan provided by him to the Company, including accrued interest, in the aggregate amount of approximately $560 thousand (approximately NIS 2.09 million) into ordinary shares of the Company. The conversion was made in accordance with the terms of the convertible loan agreement dated November 22, 2023.

The Company issued to Mr. Julien Ruggieri, a significant shareholder, 316,185 ordinary shares of the Company, and 359,900 non-registered warrants which are exercised by the same number of ordinary shares at an exercise price equal to 110% of the conversion price $1.84 (NIS 6.77) over a period of 42 months from the issuance date. This issuance included 279,952 ordinary shares and 349,940 warrants in respect of the principal of the convertible loan, and 36,233 ordinary shares and 9,960 warrants in respect of accrued interest on the loan, in the amount of $60,749, all in accordance with the Convertible Loan Agreement dated November 22, 2023.

The fair value of ordinary shares and warrants was determined by management using the assistance of an independent third-party appraiser. The fair value of ordinary shares was determined based on the market price of the Company's ordinary shares on the TASE at the issuance date based on trading data at such date. The fair value of the warrants was calculated using economic models (Monte Carlo model and Binomial model), considering the share price, exercise price, exercise period, historical volatility, risk-free interest rate, and expected dividend (zero).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** As of the reporting dates, the fair value of the conversion feature
and financial derivative feature was determined by management using the assistance of an independent external appraiser, using economic
models (i.e. Monte Carlo model and Binomial model). The measurement of the fair value was classified under level 3 in the fair value hierarchy.

The parameters used in calculating the fair value according to the aforementioned model are:

---

| | | |
|:---|:---|:---|
|  | December 31,<br>2024 | June 30,<br>2025 |
| Share price (in $) | 3.52 | 7.74 |
| Volatility - conversion feature of loan (%) | 106% | 83% |
| Volatility - warrants (%) | 78% | 75% |
| Risk-free interest - conversion feature (%) | 4.2% | 4.0% |
| Risk-free interest - warrants (%) | 4.2% | 3.9% |
| Life expectancy (in years) | 0.17 | 0.18 |

---

**KADIMASTEM LTD.**

**NOTES TO INTERIM FINANCIAL STATEMENTS**

**NOTE 3 - SIGNIFICANT EVENTS DURING THE REPORTING PERIOD (Cont.)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** Below is the movement in the conversion feature and financial derivative:

---

| | | | |
|:---|:---|:---|:---|
|  | Six months ended <br>June 30, | Six months ended <br>June 30, | |
|  | 2025 | 2024 | Year ended <br>December 31,<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands | USD in thousands | USD in thousands |
| Balance as of January 1 | 5061 | 1002 | 1002 |
| Initial recognition |  | 368 | 368 |
| Conversion of loan | (4156) |  |  |
| Revaluation expense (income) of financial derivative and the conversion feature | 9957 | (188) | 3639 |
| Revaluation recognized in Other Comprehensive Income | 801 | (37) | 52 |
| Balance as of June 30 (December 31) | 11663 | 1145 | 5061 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** During the reporting period, due to the extension of the repayment
date of the loan provided by the Company's shareholders until June 30, 2025, the loan amount was revalued at approximately $182 thousand
which was recorded against capital reserve from transactions with controlling shareholders, before deducting an amount of $42 thousand
in respect of a tax benefit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.** On January 30, 2025, the special general meeting of the shareholders
of the Company approved the appointment of Mr. Ronen Twito as the chairman of the Board of Directors and the Chief Executive Officer of
the merged company following the completion of the pending merger with NLS, as well as his updated terms of service, which shall become
effective upon completion of the merger transaction. It was also approved to grant 157,995 Restricted Stock Units (RSUs), for no consideration,
to Mr. Ronen Twito, which shall vest into the same number of ordinary shares in 24 equal monthly installments, over a total period of
two years, with the start of vesting on January 2, 2025. The price of the ordinary shares at the grant date was $4.25 (NIS 15.25). The
fair value of the RSUs was calculated according to the Black and Scholes model in a total amount of approximately $650 thousand (NIS 2.4
million).

The RSUs will immediately vest, partially or fully, under certain conditions including immediate vesting of 30% of the unvested RSUs upon an event of capital raising (including through capital raising as a result of exercising options) in total amount of $10 million or more by the merged company, subject to the completion of the merger transaction with NLS and immediate vesting of 60% of the unvested RSUs upon completion of the merger transaction.

Through June 30, 2025, the Company recorded expenses of $415 thousand related to the grant of these RSUs. In addition, through June 30, 2025, 38,741 RSUs have been vested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F.** On November 5, 2024, after approval by the Board of Directors, the
Company entered into a definitive and binding Merger Agreement with Swiss biopharma company, NLS, which develops innovative treatments
for rare and complex Central Nervous System (CNS) disorders and its common shares are traded on the Nasdaq under the symbol "NLSP".
On January 30, 2025, the Merger Agreement was approved by the general shareholders meeting. Upon completion of the merger transaction,
the current shareholders of the Company, on a fully diluted basis, will hold up to 85% of the issued and outstanding shares of NLS post-merger
(the "Merged Company"). The common shares of the Merged Company are expected to be traded on the Nasdaq.

**KADIMASTEM LTD.**

**NOTES TO INTERIM FINANCIAL STATEMENTS**

**NOTE 3 - SIGNIFICANT EVENTS DURING THE REPORTING PERIOD (Cont.)**

The completion of the merger transaction is subject to fulfillment of certain conditions precedent, including actions that NLS is required to take until the completion of the merger transaction, including the arrangement for the continued trading of its common shares on Nasdaq and its compliance with the necessary threshold conditions for that, as expected to be examined by Nasdaq as part of the application for trading of the Merged Company close to the completion date of the merger transaction.

The Company also announced the completion of a fundraising round through a private placement for NLS for a total amount of $3 million ($2 million of which has been received and completed and the remaining amount of up to $1 million is subject to the registration of the common shares for trading (see also Note 3H below)), as well as signing an agreement for up to a $25 million investment in NLS.

From time to time the parties announced an extension of the Merger Agreement until August 31, 2025, in order to obtain all necessary approvals and to complete the remaining conditions precedent. For more information related to filing of the registration statement on Form F-4 see also Note 6A and 6B below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G.** **Loan agreement on beneficial terms between the Company and Prof. Michel Revel** 

On April 22, 2025, the Company's Audit Committee and the Board of Directors approved a loan agreement with Prof. Michel Revel, the Chief Science Officer, director and significant shareholder of the Company (the "Loan Agreement" and "Prof. Revel", respectively), under which Prof. Revel will provide the Company with a loan of $269 thousand, which bears no interest, is not linked to any index and is unsecured. The loan shall remain in effect for a period of 1 year, which shall automatically be renewed for consecutive 12-month periods, unless the parties agree to an earlier repayment in writing, at least 30 days prior to the end of the applicable term.

Subject to the approval of the Company's general meeting of shareholders, which was obtained on June 10, 2025, the loan shall be converted into Company ordinary shares, at the earlier of (i) a date close to the closing date of the Company's merger transaction with NLS, if and when completed, at the market price as that time (calculated as the average share price of the 14 trading days before the conversion date) or (ii) alternatively, upon an event under which the Company completed a capital raising close to the completion date of the merger transaction or any other capital raising, according to the share price and other terms of the aforementioned capital raising.

During the reporting period, the Company recorded in the capital reserve from transactions with controlling shareholders in a total amount of $53 thousand, before deducting an amount of $12 thousand due to a tax benefit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**H.** As noted in Note 3F above, on June 30, 2025, the Company, together
with NLS, announced the completion of the remaining fundraising through a private placement transaction that amounted to $1 million. The
share price of the fundraising transaction was determined at $1.65, which reflects a 10% premium above NLS common share price at the signing
date of the fundraising agreement (i.e., March 28, 2025).

The primary purpose of the fundraising is to provide financing for the merger transaction and the subsequent period, to support working capital needs, and for other general corporate purposes.

**KADIMASTEM LTD.**

**NOTES TO INTERIM FINANCIAL STATEMENTS**

**NOTE 4 - GENERAL AND ADMINISTRATIVE EXPENSES** 

---

| | | | |
|:---|:---|:---|:---|
|  | Six months ended <br> June 30 | Six months ended <br> June 30 | |
|  | 2025 | 2024 | Year ended<br> December 31,<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands | USD in thousands | USD in thousands |
| Salaries and related expenses | 68 | 93 | 131 |
| Professional services and consultants | 115 | 145 | 169 |
| Legal fees | 41 | 59 | 79 |
| Office leasing and maintenance | 13 | 4 | (79) |
| Share-based payments | 327 | 21 | 189 |
| Directors' fees | 99 | 84 | 182 |
| Vehicles expenses | 9 | 2 | 7 |
| Depreciation and amortization | 2 | 40 | 187 |
| Other general and administrative expenses | 11 | (72) | (72) |
|  | 685 | 376 | 793 |

---

**NOTE 5 - FINANCE EXPENSES, NET**

---

| | | | |
|:---|:---|:---|:---|
|  | Six months ended <br>June 30, | Six months ended <br>June 30, | |
|  | 2025 | 2024 | Year ended December 31<br>2024 |
|  | Unaudited | Unaudited | Audited |
|  | USD in thousands | USD in thousands | USD in thousands |
| <u>Financing income</u> |  |  |  |
| Exchange rate differences | 53 | 8 | 1 |
| Other financing income | 1 | 188 | 5 |
|  | 54 | 196 | 6 |
| <u>Financing expenses</u> |  |  |  |
| Exchange rate differences | 10 | 88 | 48 |
| Financing expenses in respect of lease liabilities |  | 18 | 19 |
| Financing expenses in respect of short-term credit and bank fees | 14 | 27 | 26 |
| Revaluation of the conversion component and Derivative warrants related to a convertible loan and a loan from an interested party | 9923 | 548 | 5044 |
|  | 9947 | 681 | 5137 |
| <u>Financing expenses, net</u> | 9893 | 485 | 5131 |

---

**KADIMASTEM LTD.**

**NOTES TO INTERIM FINANCIAL STATEMENTS**

**NOTE 6 - SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. On July 2, 2025, the Company announced that to obtain all approvals
for the completion of the merger transaction between the Company and NLS and to fulfill the remaining conditions precedent, on July 1,
2025, the Company and NLS entered into an amendment to the Merger Agreement to extend the deadline for completing the merger transaction
to August 31, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. During the reporting period, between April and July 2025, following
comments received from the Securities and Exchange Commission, NLS filed several amendments to a registration statement on Form F-4 which
includes, inter alia, a description of the Company's activities, its updated annual financial statements as of December 31, 2024 and several
clarifications made to the Merger Agreement based on the terms as agreed between the parties within the framework of the merger transaction,
as approved by the Company's shareholders' meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. On July 17, 2025, following the Company's reports regarding a joint
development with ITOLERANCE Ltd. (the "Joint Development") pursuant to which the Company is entitled to a grant in a total
amount of $1 million from Bi-National Industrial Research and Development Foundation ("BIRD-F") and the Company's reports
on previous payment approvals from the grant, the Company announced that on July 16, 2025, the BIRD-F approved an additional payment for
the Joint Development from the grant, amounting to approximately $166 thousand and in aggregation since the commencing of the project
approximately $833 thousand, for the progress of the development at this stage (the "Approval of the additional payment").

The approval of the additional payment was received following the Company's successful PRE-IND meeting with the U.S. Food and Drug Administration (FDA) in February 2025.

Management believes the decision by the BIRD-F to approve the additional payment is recognition of the scientific and business achievements of the Company and ITOLERANCE, which are collaborating on the continued steps of Joint Development as mentioned above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. On August 13, 2025, Mr. Julien Ruggieri, a significant shareholder
of the Company, exercised 140,066 warrants from a 2023 agreement, into the same number of ordinary shares of the Company, as part of the
convertible loan transaction, in consideration for a total of $276 thousand.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. On August 29, 2025, the Company's Board of Directors approved the amendment
to the Merger Agreement to extend the deadline for completion of the merger transaction by up to 60 days until October 31, 2025.

- - - - - - - - - - - - - - - - - - - - - -

## Exhibit 99.2

**Exhibit 99.2**

**<u>Kadimastem Ltd.</u>**

**<u>Financial Statements as of December 31, 2024</u>**

**<u>**Table of Contents**</u>**

---

| | |
|:---|:---|
|  | **Page** |
| [Report of Independent Registered Public Accounting Firm (PCAOB ID 1281)](#a_001) | 2 |
| [Statements of Financial Position](#a_002) | 3 |
| [Statements of Profit or Loss and Other Comprehensive Loss](#a_003) | 4 |
| [Statements of Changes in Equity](#a_004) | 5 |
| [Statements of Cash Flows](#a_005) | 7 |
| [Notes to the Financial Statements](#a_006) | 8 |

---

---

| | |
|:---|:---|
| ***Kost Forer Gabbay & Kasierer*** | *Tel.: +972-3-6232525* |
| *144A Derech Menachem Begin* | *Fax: +972-3-5622555* |
| *Tel Aviv 6492102* | *ey.com* |

---

**<u>Report of Independent Registered Public Accounting Firm</u>**

To the Shareholders and the Board of Directors of Kadimastem Ltd.

**Opinion on the Financial Statements**

We have audited the accompanying statements of financial position of Kadimastem Ltd. (the "Company") as of December 31, 2024 and 2023, the related statements of profit or loss and other comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2024, 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 at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board.

**The Company's Ability to Continue as a Going Concern**

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1B to the financial statements, the Company has suffered recurring losses and negative cash flows from operations and has a deficiency in equity, an accumulated deficit and a working capital deficiency, and has stated that substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 1B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**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.

/s/ Kost Forer Gabbay & Kasierer

A member of Ernst & Young Global

We have served as the Company's auditor since 2008.<br> Tel-Aviv, Israel

June 5, 2025

**Kadimastem Ltd.**<br> **STATEMENTS OF FINANCIAL POSITION**

---

| | | | |
|:---|:---|:---|:---|
|  | | **December 31,** | **December 31,** |
|  | <br>**Note** | **2024** | **2023** |
|  |  | **USD in thousands** | **USD in thousands** |
| <u>CURRENT ASSETS</u> |  |  |  |
| Cash and cash equivalents | 4 | 650 | 1146 |
| Accounts receivable | 5 | 130 | 451 |
| Total current assets |  | 780 | 1597 |
| <u>NON-CURRENT ASSETS</u> |  |  |  |
| Pledged cash |  |  | 170 |
| Right of use assets | 6 |  | 312 |
| Property and equipment | 7 | 123 | 228 |
| Total non-current assets |  | 123 | 710 |
| **Total assets** |  | 903 | 2307 |
| <u>CURRENT LIABILITIES</u> |  |  |  |
| Loan from bank | 9a | 293 | 301 |
| Loans from interested parties | 9b | 860 | 852 |
| Trade payables | 10 | 568 | 532 |
| Accounts payable | 11 | 605 | 226 |
| Convertible loan | 15 | 1512 | 230 |
| Conversion component of convertible loan and warrants | 15 | 5061 | 1002 |
| Current maturities of lease liabilities |  | \* | 361 |
| Total current liabilities |  | 8899 | 3504 |
| <u>NON-CURRENT LIABILITIES</u> |  |  |  |
| Employee benefit liabilities | 14 |  | 5 |
| Total non-current liabilities |  |  | 5 |
| **Total liabilities** |  | 8899 | 3509 |
| <u>EQUITY</u> | 18 |  |  |
| Share capital |  | 1238 | 1238 |
| Share premium |  | 62560 | 62286 |
| Warrants |  | 1273 | 1273 |
| Reserve from share-based payment transactions | 19 | 452 | 518 |
| Reserve from transactions with controlling shareholders |  | 4105 | 3830 |
| Foreign currency translation reserve |  | (1094) | (1002) |
| Accumulated deficit |  | (76530) | (69345 |
| Total equity |  | (7996) | (1202 |
|  |  | 903 | 2307 |

---

\* Less than United States Dollars ("USD") $1 thousand.

\*\* Reclassification see Note 2H.

---

| | | | |
|:---|:---|:---|:---|
| June 5, 2025 | /s/ Ronen Twito | /s/ Liora Oren | /s/ Uri Ben Or |
| Date of approval of the<br> financial statements | Ronen Twito<br> CEO and Executive<br> Chairman of BOD | Liora Oren<br> Director | Uri Ben Or<br> CFO |

---

The accompanying Notes are an integral part of the financial statements.

**KADIMASTEM LTD.<br> Statements of Profit or Loss and Other Comprehensive Loss**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | <br>**Note** | **2024** | **2023** | **2022** |
|  |  | **USD in thousands (except per share data)** | **USD in thousands (except per share data)** | **USD in thousands (except per share data)** |
| Research and development expenses | 20a | 992 | 1608 | 4490 |
| Marketing expenses | 20b |  | 81 | 264 |
| General and administrative expenses | 20c | 793 | 1303 | 1800 |
| Other expenses (expenses for merger with NLS) |  | 269 |  |  |
| Operating loss |  | 2054 | 2992 | 6554 |
| Financing income | 20d | (6) | (36) | (22) |
| Financing expenses related to the conversion component and options of shareholders convertible loans and shareholder loans. | 20d | 5044 | 239 | 200 |
| Other financing expenses |  | 93 | 114 | 83 |
| Net financing expenses |  | 5131 | 317 | 261 |
| Loss before taxes on income |  | 7185 | 3309 | 6815 |
| Tax benefit | 16 | (7) | (54) | (50) |
| Total Loss |  | 7178 | 3255 | 6765 |
| Other comprehensive income (loss) net of tax effect: |  |  |  |  |
| <u>Amounts that will not be subsequently reclassified to profit or loss:</u> |  |  |  |  |
| Actuarial gain (loss) from remeasurement regarding defined benefit plans | 14 | (7) | (10) | 100 |
| Adjustments arising from translating financial statements from functional currency to presentation currency |  | (92) | (98) | (450) |
| Total other comprehensive income (loss) |  | (99) | (108) | (350) |
| Total comprehensive loss |  | 7277 | 3363 | 7115 |
| Basic and diluted loss per share (in USD) | 21 | 1.71 | 0.78 \* | 1.9 \* |

---

\* Adjusted retroactively due to the rights issue and due to Reverse share split. See Notes 18I and 18K.

The attached Notes constitute an integral part of the financial statements.

**KADIMASTEM LTD.**<br> **STATEMENTS OF CHANGES IN EQUITY**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Note** | **Share<br> capital** | **Share<br> premium** | **Warrants** | **Reserve<br> from<br> share-based<br> payment<br> transactions** | **Reserve<br> from<br> transactions<br> with<br> controlling<br> shareholders** | **Foreign<br> currency<br> translation<br> reserve** | **Accumulated<br> deficit** | **Total<br> equity** |
|  |  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Balance as of January 1, 2024</u> |  | 1238 | 62286 | 1273 | 518 | 3830 | (1002) | (69345) | (1202) |
| Loss |  |  |  |  |  |  |  | (7178) | (7178) |
| Total other comprehensive (loss) |  |  |  |  |  |  | (92) | (7) | (99) |
| Total comprehensive loss |  |  |  |  |  |  | (92) | (7185) | (7277) |
| Expiration of departed employees' options |  |  | 274 |  | (274) |  |  |  |  |
| Shareholder transactions, net | 9c,22b |  |  |  |  | 275 |  |  | 275 |
| Cost of share-based<br> payment |  |  |  |  | 208 |  |  |  | 208 |
| <u>Balance as of December 31, 2024</u> |  | 1238 | 62560 | 1273 | 452 | 4105 | (1094) | (76530) | (7996) |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Note** | **Share capital** | **Share premium** | **Warrants** | **Reserve from share-based payment transactions** | **Reserve from transactions with controlling shareholders** | **Foreign currency translation reserve** | **Accumulated deficit** | **Total equity** |
|  |  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Balance as of January 1, 2023</u> |  | 1081 | 58368 | 2746 | 1364 | 3518 | (904) | (66080) | 93 |
| Loss |  |  |  |  |  |  |  | (3255) | (3255) |
| Total other comprehensive income (loss) |  |  |  |  |  |  | (98) | (10) | (108) |
| Total comprehensive loss |  |  |  |  |  |  | (98) | (3265) | (3363) |
| Issue of shares, net | 18j | 157 | 1450 |  |  |  |  |  | 1607 |
| Expiration of departed employees' options |  |  | 995 |  | (995) |  |  |  |  |
| Expiration of warrants |  |  | 1473 | (1473) |  |  |  |  |  |
| Shareholder transactions, net | 9c,22b |  |  |  |  | 312 |  |  | 312 |
| Cost of share-based payment |  |  |  |  | 149 |  |  |  | 149 |
| <u>Balance as of December 31, 2023</u> |  | 1238 | 62286 | 1273 | 518 | 3830 | (1002) | (69345) | (1202) |

---

**KADIMASTEM LTD.<br> STATEMENTS OF CHANGES IN EQUITY — (Continued)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Share<br> capital** | **Premium<br> on shares** | **Warrants** | **Reserve<br> due to<br> share-based<br> payment<br> transactions** | **Reserve<br> from<br> transactions<br> with<br> controlling<br> shareholders** | **Foreign<br> currency<br> translation<br> reserve** | **Accumulated<br> deficit** | **Total<br> equity** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Balance as of January 1, 2022</u> | 999 | 56519 | 2815 | 1273 | 3208 | (454) | (59415) | 4945 |
| Loss |  |  |  |  |  |  | (6765) | (6765) |
| Total other comprehensive income (loss) |  |  |  |  |  | (450) | 100 | (350) |
| Total comprehensive loss |  |  |  |  |  | (450) | (6665) | (7115) |
| Issue of share capital and warrants, net 18j | 82 | 1705 | (69) |  |  |  |  | 1718 |
| Expiration of departed employees' options |  | 144 |  | (144) |  |  |  |  |
| Shareholder transactions, net |  |  |  |  | 310 |  |  | 310 |
| Cost of share-based payment |  |  |  | 235 |  |  |  | 235 |
| <u>Balance as of December 31, 2022</u> | 1081 | 58368 | 2746 | 1364 | 3518 | (904) | (66080) | 93 |

---

The attached Notes constitute an integral part of the financial statements.

**KADIMASTEM LTD.**<br> **STATEMENTS OF CASH FLOWS**

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Cash flows from operating activities</u> |  |  |  |
| Loss | (7178) | (3255) | (6765) |
| Adjustments to reconcile loss to net cash provided by (used in) operating activities: |  |  |  |
| Adjustments to profit or loss items: |  |  |  |
| Depreciation and amortization | 413 | 620 | 578 |
| Gain from sale of property and equipment |  | (34) |  |
| Financing expenses, net | 5131 | 317 | 261 |
| Tax benefit | (7) | (54) | (50) |
| Theoretical wages to an interested party | 130 | 130 | 143 |
| Cost of share-based payment | 208 | 149 | 235 |
| Change in employee benefit liabilities, net | (5) | (13) | 1 |
|  | 5870 | 1115 | 1168 |
| Changes in assets and liabilities: |  |  |  |
| Decrease (increase) in accounts receivable | 321 | (165) | (102) |
| Increase (decrease) in trade payables | 36 | (478) | 151 |
| Increase (decrease) in deferred grants |  |  | (118) |
| Increase (decrease) in accounts payable | 379 | (123) | (226) |
|  | 736 | (766) | (295) |
| Cash paid during the year for: |  |  |  |
| Interest paid | (133) | (90) | (68) |
| Net cash used in operating activities | (705) | (2996) | (5960) |
| <u>Cash flows from investing activities</u> |  |  |  |
| Proceeds from sale of property and equipment |  | 109 |  |
| Purchase of property and equipment | (6) | (6) | (191) |
| Change in pledged cash | 167 | (12) | (5) |
| Net cash provided by (used in) investing activities | 161 | 91 | (196) |
| <u>Cash flows from financing activities</u> |  |  |  |
| Repayment of lease liability | (361) | (448) | (521) |
| Issue of share capital and warrants (net of issue expenses) |  | 1607 | 485 |
| Exercise of warrants |  |  | 1146 |
| Receipt of a convertible loan from shareholders | 450 | 1242 |  |
| Net cash provided by financing activities | 89 | 2401 | 1110 |
| <u>Exchange rate differences on balances of cash and cash equivalents</u> | (41) | (166) | (634) |
| <u>Decrease in cash and cash equivalents</u> | (496) | (670) | (5680) |
| <u>Cash and cash equivalents at the beginning of the year</u> | 1146 | 1816 | 7490 |
| <u>Cash and cash equivalents at the end of the year</u> | 650 | 1146 | 1810 |
| <u>Material non-cash transactions</u> |  |  |  |
| Right-of-use asset recognized with corresponding lease liability |  |  | 842 |

---

The attached Notes constitute an integral part of the financial statements.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 1: — <u>General</u>**

A. <u>General description of the company and its activity:</u> 

Kadimastem Ltd. (hereinafter, the "Company") was incorporated in Israel on October 6, 2008, and began its business activities on August 27, 2009. On June 6, 2013, the Company completed a public offering of its shares on the Tel Aviv Stock Exchange ("TASE"). The Company's offices are located in Ness Ziona, Israel. The Company is engaged in the development of drugs for the treatment of terminal muscular dystrophy (also known as ALS) and diabetes in the field of regenerative medicine.

B. As of December 31, 2024, the Company's capital deficiency,
accumulated deficit, and negative working capital amounted to USD $7,996 thousand, USD $76,530 thousand, and USD $8,119 thousand, respectively.
Additionally, for the year ended December 31, 2024, the Company incurred a loss of USD $7,178 thousand and had negative cash flows
from operating activities amounting to USD $705 thousand.

The Company's ability to continue its operations depends on raising resources to finance its operations. The Company is involved in raising funds by arranging private placements to investors in Israel and abroad, raising funds on the TASE, and issuing rights to its current shareholders. At present, there is no certainty as to the Company's ability to generate income or raise additional capital in the future, if at all.

These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The financial statements do not include any adjustments regarding the carrying amounts of the assets and liabilities and their classification should the Company not continue to operate as a going concern. Such adjustment could be material.

C. <u>The effects of the Swords of Iron War:</u> 

The "Swords of Iron" War (hereinafter, the "War") broke out in the State of Israel in October 2023. The continued War has led to a slowdown in business activity in the Israeli economy due to, among other things, factories in the south and north of the country being closed, infrastructure damage, the recruitment of reserve personnel for an unknown period of time, and the disruption of economic activity in Israel. The War's continuation may have far-reaching consequences for many industries and different geographical areas of the country.

The potential fluctuations in commodity prices, foreign exchange rates, availability of materials, availability of manpower, local services, and access to local resources may affect entities that mostly operate with or in Israel.

Since this event is characterized by high uncertainty, and as of the date hereof, the duration and intensity of its impact on the economy in the medium and long term is unascertainable, the Company does not have the ability to assess the full impact of the above on the scope of its business and its operating results.

**NOTE 2: — <u>ACCOUNTING POLICIES</u>**

The following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise stated.

A. <u>Basis of presentation of the financial statements</u> 

The financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") Accounting Standards, as issued by the International Accounting Standards Board ("IASB").

B. <u>Functional currency, presentation currency, and foreign currency</u> 

The functional currency of the Company is the New Israel Shekel ("NIS"), which represents the primary economic environment in which the Company operates. The presentation currency of the financial statements is USD.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 2: — <u>ACCOUNTING POLICIES</u>** (cont.)

The financial statements are presented in USD since the Company believes that financial statements in USD provide more relevant information to the investors and users of the financial statements, who are located primarily in the US.

Assets and liabilities are translated at the closing rate at each reporting date. Profit or loss items are translated at average exchange rates for all periods presented. The resulting translation differences are recognized in other comprehensive income (loss). Capital transactions in shareholders' equity are translated using historical rates of exchange.

C. <u>Government grants</u> 

Government grants are recognized when there is a reasonable assurance that the grants would be received and that the Company would meet all the conditions for receiving the grant.

Government grants from the Israel Innovation Authority ("IIA") are recognized as a liability at the time of their receipt if there is a reasonable assurance that the research activity would result in sales that would entitle the State to royalties.

The Company does not anticipate revenues in the foreseeable future, and therefore, it does not recognize a liability component, and the grant is recorded under profit and loss as an offset from the Company's research and development expenses.

For each reporting date, the Company makes an assessment of the expected grant to be received in the subsequent period, for the reporting period, and accordingly, records a provision in the books for income receivable.

D. <u>Taxes on income</u> 

Current or deferred taxes are recognized in profit or loss, except if they refer to items that are recognized in other comprehensive income or in equity.

<u>Deferred taxes</u>

Deferred taxes are calculated with respect to the temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.

Deferred taxes are calculated according to the tax rate that is expected to apply when the asset is realized or the liability is settled, based on the tax laws that have been enacted or substantively enacted by the reporting date.

The Company recognizes deferred tax assets up to the amount of the liability for deferred taxes due to the uncertainty as to utilization of losses in the foreseeable future.

E. <u>Leases</u> 

The Company treats a contract as a lease when, in accordance with the terms of the contract, the right to control an identified asset is transferred for a period of time in exchange for a consideration.

&nbsp;&nbsp;&nbsp;&nbsp;1. <u>The Company as the lessee</u> 

For leases in which the Company is the lessee, the Company recognizes on the commencement date of the lease a right-of-use asset and a lease liability, excluding leases with a term up to 12 months and leases for which the underlying asset has a lesser value. For these excluded leases, the Company has elected to recognize these lease payments as an expense in profit or loss on a straight-line basis over the lease term. In measuring the lease liability, the Company has elected to apply the practical expedient in IFRS 16 and does not separate the lease components from the non-lease components, such as management and maintenance services, included in a single contract.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 2: — <u>ACCOUNTING POLICIES</u>** (cont.)

At the commencement date, a lease liability includes all lease payments (these payments do not include variable lease payments) that have not yet been paid, discounted at the interest rate implicit in the lease when it can be determined readily or according to the Company's incremental borrowing rate. After the commencement date, the Company measures the lease liability using the effective interest method.

The right-of-use asset at the commencement date is recognized in the amount equal to the lease liability, plus lease payments paid on or before the commencement date and any transaction costs incurred. The right-of-use asset is measured through applying the cost model and depreciated over its useful life or the term of the lease, whichever is shorter.

Below are data regarding the number of years of depreciation of the relevant right-of-use assets by class of underlying asset:

---

| | |
|:---|:---|
|  | **Years** |
| Offices | 3 |
| Vehicles | 3 |
| Equipment | 3 |

---

Where there are indications of impairment, the Company assesses the impairment of the right-of-use asset in accordance with the provisions of IAS 36.

&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Index-linked lease payments</u> 

At the commencement date of the lease, the Company uses the applicable index rate on the commencement date for the purpose of calculating future lease payments.

In transactions in which the Company is a lessee, changes in the total future lease payments as a result of a change in the index are discounted (with no change in the discount rate applicable to the lease liability) and recorded as an adjustment of the lease liability and the right-of-use asset only when there is a change in the cash flows that results from a change in the index (that is, at the time in which the adjustment to the lease payments comes into effect).

&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Lease extension and termination options</u> 

A non-cancellable lease term includes both the periods that are covered by an option to extend the lease, when it is reasonably certain that the option will be exercised, and the periods that are covered by an option to terminate the lease, when it is reasonably certain that the termination option will not be exercised.

In the event that there is a change in the likelihood of exercising an extension option or the expected non-exercise of the lease termination option, the Company remeasures the outstanding lease liability in accordance with the updated lease period, according to the updated discount rate on the day of the change in the likelihood, and the total change is credited to the balance of the right-of-use asset until it is zeroed and then, to profit or loss.

In each reporting period, the Company's management examines the likelihood of exercising an extension option and updates the aforementioned leases' amortization schedules accordingly.

According to the Company's assessment, no extension option will be exercised.

&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Subleases</u> 

In transactions where the Company leases an underlying asset (the "primary lease") and subsequently subleases such underlying asset to a third party (the "sublease"), the Company assesses whether all the risks and rewards associated with ownership of the right-of-use asset have been transferred. This assessment includes, inter alia, an evaluation of the sublease term relative to the useful life of the right-of-use asset arising from the primary lease.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 2: — <u>ACCOUNTING POLICIES</u>** (cont.)

If all the risks and rewards of ownership of the right-of-use asset have been substantially transferred, the sublease is classified as a finance lease, otherwise it is classified as an operating lease.

In the sublease entered into during the year, the risks and rewards were not transferred to the third party, therefore the accounting treatment was a reduction of lease expenses rather than classification as a financing lease.

F. <u>Property and equipment</u> 

Property and equipment are presented at cost, including direct purchase costs, and less accumulated depreciation and accumulated impairment losses, and do not include current maintenance expenses.

Depreciation is calculated at equal annual rates based on the straight-line method throughout the asset's useful life, as follows:

---

| | | |
|:---|:---|:---|
|  | **%** | **Mainly %** |
| Laboratory equipment and clean room | 15 |  |
| Office furniture and equipment | 8 – 15 | 15 |
| Computers and peripheral equipment | 33 |  |
| Leasehold improvements | See below |  |

---

Leasehold improvements are depreciated using the straight-line method over the lease period, or according to the estimated life of the improvement, whichever is shorter.

The useful life, the depreciation method, and the residual value of each asset are examined, at a minimum, per year end, and any changes are treated as a change in accounting estimate prospectively. The depreciation of assets ceases on the date on which the asset is classified as an asset held for sale or the date on which the asset is derecognized, whichever is earlier.

The Company depreciates the fixed assets according to its economic life.

G. Issuance of a unit of securities

In an issuance of a unit of securities, the proceeds received (before the issuance expenses) are allocated to the securities issued in the unit in accordance with this order of allocation: financial derivatives and other financial instruments that are presented at fair value in each period. The fair value is then determined for financial liabilities that are measured at amortized cost, and the consideration allocated for equity instruments is determined as the residual value. The issuance costs are allocated to each component on a pro rata basis, according to the amounts determined for each component of the unit.

H. Change in accounting policy — first-time implementation
of new financial reporting standards and amendments to accounting standards

&nbsp;&nbsp;&nbsp;&nbsp;1. Amendment to IAS 1, Presentation of financial statements

In January 2020, the IASB published an amendment to International Accounting Standards ("IAS") 1, Presentation of Financial Statements ("IAS 1"), regarding the requirements for classifying liabilities as current or non-current (hereinafter, the "Original Amendment"). In October 2022, the IASB published a subsequent amendment to amend the Original Amendment (hereinafter, the "Subsequent Amendment").

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 2: — <u>ACCOUNTING POLICIES</u>** (cont.)

The Subsequent Amendment stated that:

● Only financial covenants that an entity must meet before or at the end of the reporting period would affect the classification of that liability as a current liability or a non-current liability.

● For liabilities for which compliance with the financial covenant is examined within 12 consecutive months of the reporting date, a disclosure must be made in a way that would allow the users of the financial statements to assess the risks related to that liability. That is, the Subsequent Amendment states that a disclosure must be made with regard to the carrying amount of the liability, information on the financial covenants, and any facts and circumstances at the end of the reporting period that may lead to the conclusion that the entity will have difficulty in complying with the financial covenants.

The Original Amendment stated that the right to convert a liability would affect the entire liability's classification as a current or a non-current liability, except if the conversion component is equity-based.

The Original Amendment and the Subsequent Amendment were applied retroactively as of the annual periods commencing January 1, 2024.

The Company has a loan (see Note 15) that is immediately convertible into ordinary shares of the Company, with the conversion component classified in the financial statements as a financial liability. As a result of the aforementioned amendments, the liability related to the convertible loan and the liability related to the conversion component and options, amounting to USD $230 thousand and USD $1,002 thousand, respectively, as of December 31, 2023, were reclassified from non-current liabilities to current liabilities.

I. <u>Disclosure of New IFRS Standards prior to their implementation.</u> 

IFRS 18 — Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued IFRS 18, Presentation and Disclosure in Financial Statements (the "New Standard"), which replaces IAS 1, Presentation of Financial Statements (hereinafter: IAS 1).

The objective of the New Standard is to enhance comparability and transparency in financial statements.

The New Standard incorporates existing requirements from IAS 1 and introduces new requirements for the presentation in the statement of profit or loss. These include the presentation of totals and subtotals according to the new standard, disclosures of management-defined performance measures, and new requirements for the aggregation and disaggregation of financial information.

The New Standard does not change the recognition or measurement of items in the financial statements. However, as items in the statement of profit or loss will be required to be classified into one of five categories (operating, investing, financing, income taxes, and discontinued operations), it may impact the entity's reported operating profit. Moreover, the issuance of the New Standard led to limited-scope amendments to other standards, including IAS 7, Statement of Cash Flows and IAS 34, Interim Financial Reporting.

The New Standard is to be applied retrospectively for annual periods beginning on or after January 1, 2027. Early adoption is permitted in accordance with the decision of the Israeli Securities Authority, subject to disclosure for annual periods commencing on or after January 1, 2025.

The Company is evaluating the impact on the financial statements of the New Standard, including the impact of the amendments to other accounting standards resulting from the New Standard.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 3: — <u>SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS USED IN PREPARING THE FINANCIAL STATEMENTS</u>**

In the process of implementing the accounting policies in the financial statements, the Company has made the following judgments, which have a material impact on the amounts recognized in the financial statements:

A. Judgments

<u>Discount rate for lease liability</u>

The Company cannot readily determine the interest rate implicit in the lease, and therefore, for the purpose of calculating the lease liability, it uses the Company's incremental borrowing rate. The Company conducted an assessment to determine the suitable nominal interest rate for the discounting of the lease contracts, in accordance with the Company's financial risk, the lease contract term, and other economic variables.

The weighted average incremental interest rate used to discount the future lease payments when calculating the outstanding lease liability at the time of the standard's first-time implementation is 20%.

<u>Calculation of the value of the conversion component and options of the convertible loan</u>

The Company has received a convertible loan from several shareholders, and the loan agreement includes warrants that would be granted to the lenders under certain conditions. Due to the complexity of the terms of the loan agreement, which includes an embedded conversion component and a right to receive warrants upon certain conditions, the attribution of the consideration received between the components of the agreement upon initial recognition requires judgement and the use of various option pricing models. (See Note 15).

<u>Shareholder transactions</u>

The Company received a short-term loan from one of its shareholders at non-market terms. The Company accounts for these transactions as transactions that include a contribution to equity, while recognizing them according to fair value in accordance with IFRS 9. The contribution amount, which reflects the difference between the aforementioned fair value and the terms of the transaction, is credited to equity, net of the tax effect. In order to determine the contribution to equity, the Company must assess the market terms as of the day of the transaction, including the price of the guarantee under market terms, as if it had been provided by an unrelated third party.

<u>Determining the fair value of share-based payment transactions</u>

The fair value of share-based payment transactions is determined upon initial recognition, using an acceptable option pricing model. The model is based on data as to the share price and the exercise price, in addition to assumptions regarding the expected volatility, expected life expected dividend, and the risk-free interest rate.

B. <u>Estimates and assumptions</u> 

When preparing the financial statements, the management must use estimates and assumptions that affect the implementation of the accounting policy and the reported total assets, liabilities, revenues, and expenses. In formulating the accounting estimates, management relies on past experience, various facts, external factors, and reasonable assumptions, depending on the circumstances. Changes in accounting estimates are recognized in the period in which the estimate is changed.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 3: — <u>SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS USED IN PREPARING THE FINANCIAL STATEMENTS</u>** (cont.)

Below are the primary assumptions made in the financial statements in connection with uncertainties as of the reporting date and critical estimates calculated by the Company, for which a substantial change in the estimates and assumptions may change the value of assets and liabilities in the financial statements in the following year:

<u>Grants from the Israel Innovation Authority</u>

Government grants from the IIA at the Ministry of Industry, Trade and Labor are recognized as a liability if economic benefits that would generate sales, such that the State would be entitled to royalties, are expected as a result of the research and development activities. There is uncertainty regarding the estimated future cash flows that were used to determine the total liability.

<u>Determining the Fair Value of a Non-Marketable Financial Instrument — Convertible Loan</u>

The fair value of a non-marketable financial instrument classified within Level 3 of the fair value hierarchy is determined based on valuation techniques. Fair value is generally estimated based on the assessment of future cash flows discounted at current discount rates for items with similar terms and risk characteristics.

Changes in the estimates of future cash flows and discount rates, taking into account risk assessments such as liquidity risk, credit risk, and volatility, which constitute unobservable data, may affect the fair value of the financial instrument.

**NOTE 4: — <u>CASH AND CASH EQUIVALENTS</u>**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31** | **December 31** | **December 31** | **December 31** |
|  | **2024** | **2024** | **2023** | **2023** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Cash for immediate withdrawal | | 650 | | 1,146 |
|  | | 650 | | 1,146 |

---

**Note 5: — <u>Accounts receivable</u>**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31** | **December 31** | **December 31** | **December 31** |
|  | **2024** | **2024** | **2023** | **2023** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Government authorities |  | 69 |  | 35 |
| Income receivable from the IIA and the BIRD Foundation |  |  |  | 401 |
| Prepaid expenses | | 61 | | 15 |
|  | | 130 | | 451 |

---

**Note 6: — <u>Leases</u>**

The Company has lease agreements that include leases on buildings, equipment, and vehicles that are used for the Company's current operations. The lease agreements for the building, equipment, and vehicles have expired, and as of December 31, 2024, there is no asset or liability balance in respect thereof.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 6: — <u>Leases</u>** (cont.)

In 2024, a new lease agreement was signed for a building for one year only, and the Company's management estimates that it will not exercise the extension option, and accordingly the asset and the liability in respect thereof has not been recognized.

1. <u>Details regarding lease transactions</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Interest expense on lease liabilities | 19 | 90 | 68 |
| Total cash outflow for leases | 361 | 448 | 521 |

---

2. <u>Disclosures regarding right-of-use assets</u> 

<u>2024</u>

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Offices** | **Motor<br> vehicles** | **Equipment** | **Total** |
|  | **USD in thousand** | **USD in thousand** | **USD in thousand** | **USD in thousand** |
| <u>Cost</u> |  |  |  |  |
| Balance as of January 1, 2024 | 1860 | 133 | 122 | 2115 |
| <u>Additions during the year:</u> |  |  |  |  |
| New leases |  |  |  |  |
| Adjustments for indexation |  |  |  |  |
| Revaluation recognized in OCI | (10) | (1) | (1) | (12) |
| Balance as of December 31, 2024 | 1850 | 132 | 121 | 2103 |
| <u>Accumulated depreciation</u> |  |  |  |  |
| Balance as of January 1, 2024 | 1569 | 116 | 118 | 1803 |
| <u>Additions during the year:</u> |  |  |  |  |
| Adjustments for indexation |  |  |  |  |
| Depreciation and amortization | 285 | 16 | 4 | 305 |
| Revaluation recognized in OCI | (4) |  | (1) | (5) |
| Balance as of December 31, 2024 | 1850 | 132 | 121 | 2103 |
| <u>Depreciated cost balance as of December 31, 2024</u> |  |  |  |  |

---

<u>2023</u>

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Offices** | **Motor<br> vehicles** | **Equipment** | **Total** |
|  | **USD in thousand** | **USD in thousand** | **USD in thousand** | **USD in thousand** |
| <u>Cost</u> |  |  |  |  |
| Balance as of January 1, 2023 | 1926 | 137 | 125 | 2188 |
| <u>Additions during the year:</u> |  |  |  |  |
| Adjustments for indexation | (8) |  |  | (8) |
| Revaluation recognized in OCI | (58) | (4) | (3) | (65) |
| Balance as of December 31, 2023 | 1860 | 133 | 122 | 2115 |
| <u>Accumulated depreciation</u> |  |  |  |  |
| Balance as of January 1, 2023 | 1211 | 84 | 30 | 1325 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 6: — <u>Leases</u>** (cont.)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Offices** | **Motor<br> vehicles** | **Equipment** | **Total** |
|  | **USD in thousand** | **USD in thousand** | **USD in thousand** | **USD in thousand** |
| <u>Additions during the year:</u> |  |  |  |  |
| Adjustments for indexation | (8) |  |  | (8) |
| Depreciation and amortization | 395 | 34 | 87 | 516 |
| Revaluation recognized in OCI | (29) | (2) | 1 | (30) |
| Balance as of December 31, 2023 | 1569 | 116 | 118 | 1803 |
| <u>Depreciated cost balance as of December 31, 2023</u> | 291 | 17 | 4 | 312 |

---

<u>Analysis of the lease liabilities' repayment dates</u> — see Note 13B.

**Note 7: — <u>Property and equipment</u>**

<u>2024</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Laboratory<br> equipment and<br> clean room** | **Office<br> furniture and<br> equipment** | **Computers<br> and peripheral<br> equipment** | **Leasehold<br> improvements** | **Total** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Cost</u> |  |  |  |  |  |
| Balance as of January 1, 2024 | 971 | 77 | 291 | 133 | 1472 |
| Changes during the year: |  |  |  |  |  |
| Purchases | 4 |  |  | 2 | 6 |
| Revaluation recognized in OCI | (5) |  | (2) | (1) | (8) |
| Balance as of December 31, 2024 | 970 | 77 | 289 | 134 | 1470 |
| <u>Accumulated depreciation</u> |  |  |  |  |  |
| Balance as of January 1, 2024 | 815 | 68 | 249 | 112 | 1244 |
| Changes during the year: |  |  |  |  |  |
| Depreciation | 73 | 3 | 11 | 21 | 108 |
| Revaluation recognized in OCI | (4) |  | (1) |  | (5) |
| Balance as of December 31, 2024 | 884 | 71 | 259 | 133 | 1347 |
| <u>Amortized balance as of December 31, 2024</u> | 86 | 6 | 30 | 1 | 123 |

---

<u>2023</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Laboratory<br> equipment and<br> clean room** | **Office<br> furniture and<br> equipment** | **Computers<br> and peripheral<br> equipment** | **Leasehold<br> improvements** | **Total** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Cost</u> |  |  |  |  |  |
| Balance as of January 1,<br> 2023 | 1767 | 84 | 311 | 138 | 2300 |
| Changes during the year: |  |  |  |  |  |
| Disposals | (737) | (5) | (11) | (1) | (754) |
| Purchases | 6 |  |  |  | 6 |
| Revaluation recognized in OCI | (65) | (2) | (9) | (4) | (80) |
| Balance as of December 31, 2023 | 971 | 77 | 291 | 133 | 1472 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 7: — <u>Property and equipment</u>** (cont.)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Laboratory<br> equipment and<br> clean room** | **Office<br> furniture and<br> equipment** | **Computers<br> and peripheral<br> equipment** | **Leasehold<br> improvements** | **Total** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Accumulated depreciation</u> |  |  |  |  |  |
| Balance as of January 1,<br> 2023 | 1446 | 71 | 256 | 111 | 1884 |
| Changes during the year: |  |  |  |  |  |
| Disposals | (667) | (5) | (10) | (1) | (683) |
| Depreciation | 89 | 4 | 10 | 5 | 108 |
| Revaluation recognized in OCI | (53) | (2) | (7) | (3) | (65) |
| Balance as of December 31, 2023 | 815 | 68 | 249 | 112 | 1244 |
| <u>Amortized cost balance as of December 31, 2023</u> | 156 | 9 | 42 | 21 | 228 |

---

**Note 8: — <u>Fair value measurement</u>**

The balances of cash and cash equivalents, accounts receivables, restricted cash, short-term bank credit, trade payables, accounts payable, and interested-party loans in the financial statements are equal to or approximately their fair value.

The tables below present the fair value measurement hierarchy for the Company's liabilities and others as of December 31, 2024 and December 31, 2023.

As of December 31, 2024:

---

| | | |
|:---|:---|:---|
|  | **Fair value<br> hierarchy<br> Level 3** | **Fair value<br> hierarchy<br> Level 3** |
|  | **USD<br> in thousands** | **USD<br> in thousands** |
| Liabilities measured at fair value (Notes 9 and 15): | | |
| Interest-bearing loans, including a convertible loan (see Note 15) | | 6,573 |

---

As of December 31, 2023:

---

| | | |
|:---|:---|:---|
|  | **Fair value<br> hierarchy<br> Level 3** | **Fair value<br> hierarchy<br> Level 3** |
|  | **USD<br> in thousands** | **USD<br> in thousands** |
| Liabilities measured at fair value (Notes 9 and 15): | | |
| Interest-bearing loans including convertible loan (See Note 15) | | 1,232 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 9: — <u>LIABILITIES AND LOANS FROM INTERESTED PARTIES AND OTHERS</u>**

A. <u>Composition</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Non-linked** | **Index-linked** | **Total** |
|  | **USD in thousand** | **USD in thousand** | **USD in thousand** |
| <u>December 31, 2024</u> |  |  |  |
| Short-term loan from banks | 293 |  | 293 |
| Convertible loan from shareholders (Note 15) | 1512 |  | 1512 |
| Embedded derivative and conversion component of a convertible loan (see Note 15) | 5061 |  | 5061 |
| Short-term credit from shareholders | 860 |  | 860 |
| Total | 7726 |  | 7726 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **Non-linked** | **Index-linked** | **Total** |
|  | **USD in thousand** | **USD in thousand** | **USD in thousand** |
| <u>December 31, 2023</u> |  |  |  |
| Short-term bank loan | 301 |  | 301 |
| Lease liabilities |  | 361 | 361 |
| Convertible shareholder loan (Note 15) | 230 |  | 230 |
| A conversion component and an embedded derivative of a convertible loan (Note 15) | 1002 |  | 1002 |
| Short-term credit from shareholder | 852 |  | 852 |
| Total | 2385 | 361 | 2746 |

---

A. In respect of a loan agreement with a bank, in the amount of
USD $330 thousand (NIS 1,200 thousand) (hereinafter, the "Bank Loan"), Professor Michel Revel (hereinafter, "Prof.
Revel") has provided a guarantee without the Company paying anything in consideration (hereinafter, the "Benefit").
The Bank Loan terms are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;1. The Bank Loan will bear annual interest at the rate of prime
+ 1.75, as determined in commercial negotiation between the Company and the bank.

&nbsp;&nbsp;&nbsp;&nbsp;2. The Company will pay monthly interest payments on the Bank
Loan.

When the Bank Loan was first recognized, the Company measured the fair value of the benefit it had received from Prof. Revel in his capacity as an interested party in the Company and credited it to the interested party transaction capital reserve, less the tax effect. The discount rate was determined according to the CAPM (capital asset pricing model) and the WACC (weighted average cost of capital) as of the reporting date, and was determined by the Company at a rate of approximately 21%, based on the following assumptions:

---

| | |
|:---|:---|
| Rate of return | 21.0% |
| Variance | 1.02 |
| Risk-free interest | 4.1% |

---

Since December 31, 2020, the loan has been renewed annually for an additional year, such that as of December 31, 2024, the repayment date is December 31, 2025.

As of December 31, 2024, due to the change in interest rates in the economy, the interest rate on the Bank Loan is 7.75%.

The Bank Loan is presented at fair value as of December 31, 2024, in the amount of USD $293 thousand.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 9: — <u>LIABILITIES AND LOANS FROM INTERESTED PARTIES AND OTHERS</u>** (cont.)

Due to updates to the aforementioned loan terms, in 2024, 2023, and 2022, the Company credited a benefit to the interested party transactions capital reserve, totaling USD $28, $53, and47$ thousand net, respectively.

B. Below is a breakdown of the loans from an interested party as
of December 31, 2024:

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Loan receipt date** | **Name of the<br> lender** | **Repayment date according to the original loan agreement terms** | **Loan amount** | **Loan terms** |  | **Loan amount converted into share capital** | **Number of shares (p.v. NIS 0.1) issued for the conversion of the loan** | **Date of conversion to equity** | **Outstanding loan balances as of the reporting date (nominal)** | **Outstanding loan balances as of the reporting date<br> (fair value)** | **Comments** |
|  |  |  | **USD in thousands** | |  | **USD in thousands** | | | **USD in thousands** | **USD in thousands** |  |
| 29/12/2020 | Prof. Michel Revel | 30/06/2021 | 1557 |  | (1) | 962 | 720447 | 29/12/2021 | 595 | 485 | See Note 13C |
| 10/03/2021 | Prof. Michel Revel | 30/06/2021 | 460 |  | (1) |  |  |  | 460 | 375 | See Note 13C |
|  |  |  |  |  |  |  |  |  | 1055 | 860 |  |

---

<u>Loan terms</u>

(1) The loans do not bear interest, and they will be repaid in a
lump-sum installments according to the earliest of (a) the date specified as the repayment date according to the terms of the
original agreement; or (b) the date the Company completes a public offering of shares in which Prof. Revel will participate, provided
that the portion of the loan that will be repaid does not exceed Prof. Revel's total investment in the public offering in any case.
The Company has the right to an early repayment of the loan or part thereof without an early repayment penalty. Due to the aforementioned
update to the loan terms, in the years 2024 and 2023, the Company credited a benefit to the interested party transactions capital
reserve, equal to USD $118 and $129 thousand, net.

**NOTE 10: — <u>TRADE PAYABLES</u>**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31** | **December 31** | **December 31** | **December 31** |
|  | **2024** | **2024** | **2023** | **2023** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Open accounts |  | 206 |  | 133 |
| Accrued expenses |  | 146 |  | 399 |
| Merger Expenses Payable in Connection with the Merger Transaction<br> with NLS | | 216 | |  |
|  | | 568 | | 532 |

---

**Note 11: — <u>Accounts payable</u>**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31** | **December 31** | **December 31** | **December 31** |
|  | **2024** | **2024** | **2023** | **2023** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Deferred Grants see Note 17F |  | 42 |  |  |
| NLS Current account\*\* |  | 400 |  |  |
| Employees and payroll accruals**\*** | | 163 | | 226 |
|  | | 605 | | 226 |

---

\* Includes a bonus in the amount of USD $82 thousand in respect of a liability to related parties (see Note 22).

\*\* A total of NIS 1,496 thousand (USD $400 thousand) was received on November 20, 2024 from the Swiss biopharmaceutical company NLS Pharmaceutics Ltd ("NLS"). This amount represents a current account between the Company and NLS intended for the settlement of future shared costs related to the merger transaction. The unused balance of the current account will be settled upon completion of the merger.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 12: — <u>CONTINGENT liabilities to the Innovation Authority in respect of royalties</u>**

A. The Company received grants from the government of Israel for
participation in research and development, and in exchange, it committed to pay royalties at a rate of 3% from sales of the research
and development outcomes that were funded up to the total grants received, dollar-linked and plus interest at the LIBOR interest
(see Note 2C).

B. On March 2, 2022, the Company received the approval of
the IIA to receive a support grant for a total budget of USD $3 million (NIS 10 million) (hereinafter, the "Budget"),
for the purpose of a plan to continue the development of cellular therapy to treat ALS. The IIA's participation will be at
a rate of 40% of the total Budget.

As of the date of the financial statements, the Company received USD $1,030 thousands from this amount.

The total grants received from the National Authority for Technological Innovation by December 31, 2024, for which the Company is contingently liable to pay future royalties, was USD $14,209 thousand.

As of the date of the financial statements, the Company does not recognize a liability to the IIA, as it does not anticipate having revenues in the foreseeable future.

**Note 13: — <u>Financial Instruments</u>**

A. <u>Financial assets</u> 

Below is a classification of the financial assets and financial liabilities in the financial statements for the financial instrument categories in accordance with IFRS 9:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31** | **December 31** | **December 31** | **December 31** |
|  | **2024** | **2024** | **2023** | **2023** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Financial assets at amortized cost:</u> | | | | |
| Accounts receivable | | 130 | | 451 |

---

B. <u>Financial liabilities, interest-bearing loans and credits</u> 

---

| | | |
|:---|:---|:---|
|  | **December 31** | **December 31** |
|  | **2024** | **2023** |
|  | **USD in thousands** | **USD in thousands** |
| <u>Financial Liability</u> |  |  |
| Liability for a financial lease – effective interest for the benefit of the calculation 20% |  |  |
| Current maturities |  | 361 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 13: — <u>Financial Instruments</u>** (cont.)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | | | **December 31** | **December 31** |
|  | **The effective<br> interest rate/**<br>**Revaluation<sup>(1)</sup>** | **Repayment**<br>**date** | **2024** | **2023** |
|  | |  | **USD in thousands** | **USD in thousands** |
| <u>Interest-bearing loans and current borrowings from an interested party:</u> |  |  |  |  |
| A bank loan, USD $330 thousand (see Note 9b), the interest rate as of the date of the report is 7.75% | 21% | 31/12/25 | 293 | 301 |
| Loans from related parties (see Note 9b) | 20% | See Note 9b | 860 | 852 |
| Convertible loan | 370% | See Note 15 | 1512 | 230 |
| Liability in respect of conversion component and options |  | See Note 15 | 5061 | 1002 |
| Total financial liabilities |  |  | 7726 | 2385 |

---

(1) The imputed interest is based on an external valuation.

Liabilities for a transaction with an interested party is measured according to fair value at the time of the transaction. Since it is a transaction in the capacity of a shareholder, the Company credits the difference between the fair value and the proceeds from the transaction after deducting the tax to equity in the interested party capital reserve item. The Company assessed the market conditions on the day of the transaction for each transaction and in different periods at a rate of about 21 percent.

In each reporting period, the Company recognizes financing expenses due to the revaluation of the loan as of the reporting date.

As of the date of the report, the Company recognized financing expenses due to the revaluation of loans from an interested party and a loan from a banking corporation amounting to approximately USD $5,044 thousand in 2024 and approximately USD $153 thousand in 2023.

C. <u>Management's goals and policies regarding financial risk management</u> 

The Company's main financial liabilities consist of loans. These financial liabilities are mainly intended to finance the Company's operations and provide guarantees that support its operations. The Company's main assets are comprised of receivables and cash derives directly from its operations.

The Company is exposed to market risk, interest rate risk, foreign currency risk, and liquidity risk. The Company's senior management oversees the management of these risks.

&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Market risk</u> 

Market risk is the risk that the fair value or future cash flows from a financial instrument will change because of changes in market prices. Market risks include three types of risk: interest rate risk, currency risk, and other price risks, such as stock price risk and commodity price risk. Financial instruments that are affected by the market risk include, among others, loans and borrowings and deposits.

&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Interest risk</u> 

The interest risk is the risk that future fair value or cash flows from a financial instrument will change because of changes in the market interest rate.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 13: — <u>Financial Instruments</u>** (cont.)

&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Foreign currency risk</u> 

The Company is exposed to an exchange rate risk arising from exposure to various currencies, mainly the US dollar and the euro. The exchange rate risk arises from recognized liabilities that are denominated in a foreign currency that is not the functional currency.

&nbsp;&nbsp;&nbsp;&nbsp;4. Foreign currency sensitivity analysis:

The table below demonstrates the sensitivity test to a reasonably possible change in dollar exchange rates, while all other variables remain unchanged. The impact on the Company's pre-tax loss is due to the changes in the fair value of assets and liabilities.

---

| | | |
|:---|:---|:---|
|  | **December 31** | **December 31** |
|  | **2024** | **2023** |
|  | **USD in thousands** | **USD in thousands** |
| Sensitivity test to changes in the dollar exchange rate |  |  |
| Profit (loss) from the change, before tax: |  |  |
| A 5% exchange rate increase | (325) | 13 |
| A 5% exchange rate decrease | 325 | (13) |

---

&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Liquidity risks</u> 

The Company monitors the risk to a shortage of funds using a liquidity planning tool. The table below summarizes the maturity profile of the Company's financial liabilities based on contractual undiscounted payments (including interest payments):

<u>December 31, 2024</u>

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Up to<br> one year** | **One to<br> two years** | **Two to<br> three years** | **Three years to<br> four years** | **Four years to<br> five years** | **Over<br> five years** | **Total** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Trade payables | 568 |  |  |  |  |  | 568 |
| Loans from an interested party | 860 |  |  |  |  |  | 860 |
| Bank loans | 329 |  |  |  |  |  | 329 |
| Accounts payable | 605 |  |  |  |  |  | 605 |
| Convertible loan | 1512 |  |  |  |  |  | 1512 |
|  | 3874 |  |  |  |  |  | 3874 |

---

<u>December 31, 2023</u>

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Up to<br> one year** | **One to<br> two years** | **Two to<br> three years** | **Three years to<br> four years** | **Four years to<br> five years** | **Over<br> five years** | **Total** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Trade payables | 532 |  |  |  |  |  | 532 |
| Lease liabilities | 361 |  |  |  |  |  | 361 |
| Loans from an interested party | 873 |  |  |  |  |  | 873 |
| Bank loans | 356 |  |  |  |  |  | 356 |
| Accounts payable | 226 |  |  |  |  |  | 226 |
| Convertible loan | 1409 |  |  |  |  |  | 1409 |
|  | 3757 |  |  |  |  |  | 3757 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 13: — <u>Financial Instruments</u>** (cont.)

D. <u>Changes in liabilities arising from financing activities</u> 

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Loans from<br> interested<br> parties** | **Bank loans** | **Lease<br> liabilities** | **Total liabilities<br> arising from<br> financing<br> activities** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Balance as of January 1, 2022</u> | 1018 | 339 | 555 | 1912 |
| Effect of changes in fair value | 111 | 53 |  | 164 |
| Repayment of lease liability |  |  | (474) | (474) |
| Recognition of lease liability |  |  | 842 | 842 |
| Changes against capital reserves | (119) | (61) |  | (180) |
| Revaluation recognized in OCI | (118) | (39) | (81) | (238) |
| <u>Balance as of December 31, 2022</u> | 892 | 292 | 842 | 2026 |
| Effect of changes in fair value | 114 | 70 |  | 184 |
| Repayment of lease liability |  |  | (448) | (448) |
| Recognition of liability for convertible loan | 201 |  |  | 201 |
| Recognition of the liability due to the conversion component and options | 1021 |  |  | 1021 |
| Changes against capital reserves | (129) | (53) |  | (182) |
| Revaluation recognized in OCI | (6) | (8) | (33) | (47) |
| <u>Balance as of December 31, 2023</u> | 2093 | 301 | 361 | 2755 |
| Effect of changes in fair value | 4936 | 19 |  | 4955 |
| Repayment of lease liability |  |  | (354) | (354) |
| Recognition of the liability for convertible loan | 82 |  |  | 82 |
| Recognition of the liability due to the conversion component and options | 368 |  |  | 368 |
| Changes against capital reserves | (118) | (25) |  | (143) |
| Revaluation recognized in OCI | 72 | (2) | (7) | 63 |
| <u>Balance as of December 31, 2024</u> | 7433 | 293 |  | 7726 |

---

e. <u>Management of the Company's capital</u> 

The Company's goals in managing its equity are to preserve the Company's ability to ensure business continuity, and thus generate a return for the shareholders, investors, and other interested parties.

The Group pledged a portion of its short-term deposits. As of December 31, 2023, the fair value of the pledged deposits amounted to USD $170 thousand. In October 2024, the deposit was released, and as of December 31, 2024, its balance is zero.

**Note 14: — <u>EMPLOYEE BENEFIT ASSETS AND LIABILITIES</u>**

Employee benefits include short-term benefits, post-employment benefits, other long-term benefits, and termination benefits.

<u>Post-employment benefits</u>

The applicable labor laws and the Severance Pay Law in Israel require the Company to pay severance to employees upon their dismissal or retirement, or to make regular contributions into defined contribution plans according to Section 14 of the Severance Pay Law, as described below. The Company's liability accounted for is a post-employment benefit.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 14: — <u>EMPLOYEE BENEFIT ASSETS AND LIABILITIES</u>** (cont.)

The calculation of the Company's liability with respect to employee benefits is determined according to the effective employment agreement and the employee's salary and employment terms, which establish the right to receive compensation.

The post-employment employee benefits are generally funded by contributions that are classified as a defined benefit plan or a defined contribution plan, as detailed below.

1. <u>Defined contribution plans</u> 

Section 14 of the Severance Pay Law (1963) applies to part of the compensation payments, pursuant to which the fixed contributions paid by the Company into pension funds or policies of insurance companies release the Company from any additional liability to employees for whom said contributions were made. These contributions and contributions for benefits represent defined contribution plans.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Expenses for defined contribution plans | | 48 | | 91 | | 142 |

---

2. <u>Defined benefit plans</u>:

The Company accounts for that part of the payment of compensation that is not covered by contributions in defined contribution plans, as above, as a defined benefit plan for which an employee benefit liability is recognized and for which the Company deposits amounts in central severance pay funds and in qualifying insurance policies.

A) <u>Changes in the defined benefit liability and the fair value of the plan's assets</u> 

<u>2024</u>

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | |
|  | **Balance<br> as of<br> January 1,<br> 2024** | **Cost of<br> current<br> service** | **Interest<br> expenses,<br> net** | **Total<br> expenses<br> credited<br> to profit<br> or loss in<br> the period** | **Payments<br> from the<br> plan** | **Actuarial<br> gain due to<br> changes in<br> financial<br> assumptions** | **Actuarial<br> gain (loss)<br> due to<br> deviations in<br> experience** | **Total impact<br> on other<br> comprehensive<br> income (loss)<br> in the period** | **Employer<br> contributions** |<br>**Balance as of<br> December 31,<br> 2024** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Defined benefit liabilities | (455) | (9) | (24) | (33) | 330 |  | (61) | (61) |  | (219) |
| Fair value of the plan's assets | 450 |  | 24 | 24 | (330) |  | 54 | 54 | 21 | 219 |
| Net liability (asset) for a defined benefit | (5) | (9) | (0) | (9) |  |  | (7) | (7) | 21 |  |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 14: — <u>EMPLOYEE BENEFIT ASSETS AND LIABILITIES</u>** (cont.)

<u>2023</u>

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Expenses charged to profit or loss** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | **Gain (loss) due to remeasurement in other<br> comprehensive income** | |
|  | **Balance<br> as of<br> January 1,<br> 2023** | **Cost of<br> current<br> service** | **Interest<br> expenses,<br> net** | **Total<br> expenses<br> credited<br> to profit<br> or loss in<br> the period** | **Payments<br> from the<br> plan** | **Actuarial<br> gain due to<br> changes in<br> financial<br> assumptions** | **Actuarial<br> gain (loss)<br> due to<br> deviations in<br> experience** | **Total impact<br> on other<br> comprehensive<br> income (loss)<br> in the period** | **Employer<br> contributions** |<br>**Balance as of<br> December 31,<br> 2023** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Defined benefit liabilities | (594) | (25) | (32) | (57) | 208 | 5 | (17) | (12) |  | (455) |
| Fair value of the plan's assets | 575 |  | 31 | 31 | (192) |  | 2 | 2 | 34 | 450 |
| Net liability (asset) for a defined benefit | (19) | (25) | (1) | (26) | 16 | 5 | (15) | (10) | 34 | (5) |

---

B) <u>The main assumptions in respect of a defined benefit plan</u> 

---

| | | |
|:---|:---|:---|
|  | **2024** | **2023** |
|  | **%** | **%** |
| Discount rate<sup>(A)</sup> | 3.0 | 3.0 |
| Expected salary increase rate | 2.0 | 2.0 |

---

(A) The discount rate is based on high quality index-linked corporate
bonds.

Below are the reasonably possible changes as of the end of the reporting period, for each actuarial assumption, assuming that the other actuarial assumptions are constant:

---

| | |
|:---|:---|
|  | **The change<br> in the defined<br> benefit liability** |
|  | **USD in<br> thousands** |
| As of December 31, 2024: |  |
| <u>Sensitivity test to a change in the rate of the expected salary increase</u> |  |
| The change as a result of: |  |
| Salary increase of 1% | 15 |
| Salary decrease of 1% | (13) |
| <u>Sensitivity test to a change in the discount rate of the plan's assets and liabilities</u> |  |
| The change as a result of: |  |
| Increase of 1% in discount rate | (13) |
| Decrease of 1% in discount rate | 15 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 15: — <u>CONVERTIBLE LOAN AND CONVERSION COMPONENT OF CONVERTIBLE LOAN AND WARRANTS</u>**

A. On October 16, 2023, the Company entered into an agreement
with the Alpha Capital Anstalt Fund (hereinafter, the "Alpha Fund") and Mr. Julian Ruggieri (hereinafter, "Mr. Ruggieri"),
one of the Company's shareholders, to invest up to USD $1.7 million in the Company through a convertible loan (hereinafter,
the "Loan Principal") that may be converted into ordinary shares and non-marketable warrants, exercisable into the Company's
ordinary shares of NIS 0.1 par value. The loan agreement was approved at the shareholders' meeting on December 3, 2023.

<u>Below are the terms of the loan:</u>

&nbsp;&nbsp;&nbsp;&nbsp;1. A total of USD $1.25 million (Alpha Fund — USD
$1 million; Mr. Ruggieri — USD $250 thousand) (hereinafter, the "Initial Loan Amount") will be
disbursed by the investors up to 7 days after the fulfillment of all the conditions (as defined below) (hereinafter, the "First
Completion Date").

&nbsp;&nbsp;&nbsp;&nbsp;2. The Company will have the right to require the investors
to provide the Company with an additional amount in excess of the Initial Loan Amount of USD $450 thousand (Alpha Fund — USD
$200 thousand; Mr. Ruggieri — USD $250 thousand) (hereinafter, the "Second Loan Amount") in the 12-month period
starting on the First Completion Date.

The loan principal will bear interest at an annual rate of 10% (non-linked) (hereinafter, the "Interest" and with the loan principal, the "Loan"). The Loan repayment date will be after 15 months from the First Completion Date, and despite the above, the Company may extend the Loan repayment date by an additional period of 6 months (hereinafter, the "Extension Period" and the "Repayment Date," respectively). The Company will not be allowed to pay off the Loan before the Repayment Date. As of the reporting date, the Loan has not yet been converted, as it is subject to the merger transaction with NLS.

On the due date, the investors will be entitled, at their sole discretion, to repayment of the Loan in one of the following two methods: (a) paying off the Loan in cash, or (b) paying off the Loan by way of conversion into ordinary shares of the Company, (hereinafter, "Shares"); in the event that on the due date, the Company will not have the means to repay the Loan, the investors may, at their sole discretion, convert the Loan, as described above, or remain indebted until a later date when the Company can repay the Loan. It is clarified that the investors have the right to convert the Loan into Shares at any time starting from the date of deposit of the Initial Loan Amount, at their sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;3. To the extent that the investors choose to convert the Loan
into Shares, the Loan will be converted into Shares at the price that is the lower of (a) a Company value of USD $7 million
(NIS 28 million) (before the investment money), based on issued and paid-up capital on the conversion date, or (b) a price
that reflects a 10% discount on the average price of the Company's Shares in the 30 trading days preceding the date of the
conversion notice, subject to additional conversion price adjustments to protect against dilution (as detailed below). To clarify, the
conversion price for each Share will not be less than the minimum price per Share according to the Tel Aviv Stock Exchange rules and
regulations (hereinafter, the "Stock Exchange"). As applicable from time to time (hereinafter, the "conversion shares"
and the "conversion price," respectively), as the Company makes capital changes (such as a capital split or consolidation),
the conversion shares and the conversion price will be adjusted accordingly in order to safeguard the investors' rights. To clarify,
investors will not be allocated securities for this transaction in any case: (a) at a rate exceeding 74.99% of the Company's
issued and paid-up capital after full dilution; or (b) at an amount that would require a tender to acquire all outstanding
shares, as this term is defined in the Company's law. Any part of the loan that is not converted into equity will remain as the
Company's debt to the investors.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 15: — <u>CONVERTIBLE LOAN AND CONVERSION COMPONENT OF CONVERTIBLE LOAN AND WARRANTS</u>** (cont.)

&nbsp;&nbsp;&nbsp;&nbsp;4. To the extent that the investors choose to convert the Loan
into Shares, and subject to obtaining the Stock Exchange's approval (as required), the Company will also issue non-marketable warrants
to the investors that can be exercised for Shares, which will reflect a rate equal to 125% of the total conversion shares that will be
received as a result of the loan's conversion (hereinafter, the "Warrants," and with the conversion shares, the "Offered
Securities"). The exercise price of the Warrants will be equal to a rate of 110% of the conversion share price, and the Warrants'
exercise period will be 42 months from the date of their issuance. To the extent that the Company extends the payment date by the
Extension Period, the Company will issue warrants to the investors, which will reflect an amount of 50% of the shares that resulted from
and/or that the investors would be entitled to if they chose to convert the loan amount payable at the time of the notice of the Extension
Period, under the same conditions as the Warrants (hereinafter, the "Additional Warrants"). Notwithstanding the above regarding
the issuance of the Additional Warrants, if the Company's securities are listed on the Nasdaq Capital Market on or before the due
date, or if the Company has a pending application for listing on the Nasdaq Capital Market, the investors will not be entitled to the
Additional Warrants.

&nbsp;&nbsp;&nbsp;&nbsp;5. Until the full repayment date of the Loan, the investors
will be entitled to an anti-dilution mechanism when the Loan is converted, to the extent that it is converted, upon the occurrence
of a dilutive event (as defined in the convertible loan agreement), and: (a) if the price per share (or the effective price per
unit, as the case may be) in the dilutive event (hereinafter, the "Effective Price") reflects a discount of less than 10%
of the last conversion price for the investors, and if there is no such price, then the conversion price that would have been obtained
if the investors had converted immediately before the dilutive event, and the total Shares that had been issued up to that time under
all the dilutive events would be lower than 20% of the Company's issued and paid-up capital after the issuance of the Shares
in the last dilutive event, the protection mechanism will be based on a weighted average of the Company's share capital before
and after the dilutive event, as stipulated in the agreement; or (b) if the Effective Price of the security to be issued in the
event of a dilutive event reflects a discount of more than 10% of the relevant conversion price for the investors, and if there is no
such price, then the conversion price that would have been obtained if the investors had converted immediately before the dilutive event,
or if the total of the Shares that had been issued up to that time under all the dilutive events would be 20% or more than the Company's
issued capital after the issuance of the Shares in the last dilutive event — the protection mechanism will be on a "full
ratchet" basis, that is, the conversion price will be adjusted to the Effective Price of the security.

&nbsp;&nbsp;&nbsp;&nbsp;6. Investors will have the right to demand the repayment of
the Loan immediately in certain situations, the main of which include: (a) the submission of an application by or against the Company
for insolvency, liquidation, settlement, [or other similar event] that is not dismissed or stricken out within 90 days; (b) the
appointment of a receiver, liquidator, trustee, special manager, [or other similar person] without their release after a period of more
than 30 days; (c) the termination or suspension of all or substantially all of the Company's business activities at that
time, for a period that exceeds 30 days; (d) a material violation of a condition, representation, or warranty made by the Company
as part of the convertible loan agreement that is not rectified for up to 30 days from the date of receipt of a written notice of
the said violation; (e) non-payment of the Loan on the due date in accordance with the convertible loan agreement (hereinafter,
"Causes for Immediate Repayment"). Insofar as a Cause for Immediate Repayment has occurred and the Company does not make
the Loan repayment within three business days from the date of receipt of said demand, the investors will be entitled to demand
the repayment of the Loan through conversion according to the lower of (a) a Company valuation of USD $7 million (pre-money)
on the basis of issued and paid-up capital; or (b) a 20% discount on the average price of the Company's Shares in the
30 trading days preceding the date of the conversion notice (hereinafter, the "Conversion of the Loan upon an Immediate Repayment
Cause").

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 15: — <u>CONVERTIBLE LOAN AND CONVERSION COMPONENT OF CONVERTIBLE LOAN AND WARRANTS</u>** (cont.)

&nbsp;&nbsp;&nbsp;&nbsp;7. The completion of the convertible loan agreement depends
on the fulfillment of the conditions precedent, the main ones of which are detailed below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Obtaining the Stock Exchange's approval for the issuance
of all the Offered Securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Obtaining the approval of the general meeting of the Company's
shareholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Amending the Company's Articles of Association in such
a way that the maximum number of directors that serve on the Company's Board of Directors will be reduced to only 6 directors and
receiving letters of resignation from 2 directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. The Stock Exchange's approval.

On December 13, 2023, all the conditions precedent for the completion of the investment transaction in the convertible loan with the Company's shareholders were met.

Until December 21, 2023, the investors transferred a total of USD $1,250 thousand (NIS 4,540 thousand), gross, and the issuance expenses totaled USD $55 thousand.

By April 4, 2024 (the "completion date"), the investors transferred an additional amount of approximately USD $450 thousand (approximately NIS 1,692 thousand).

In accordance with the embedded derivative measurement guidance, as set forth in IFRS 9, the embedded derivative must be separated from the primary contract by measuring the fair value of the embedded derivative and attributing the remaining consideration to the primary contract. The embedded derivative component must be measured every period at fair value and the changes are then attributed to profit or loss (hereinafter, "Fair Value Through Profit or Loss").

As a result, when the convertible loan was initially recognized, the Company measured the fair value of the conversion right and attributed the remainder of the consideration received for the total convertible loan to the loan component itself, which constitutes the primary contract, as noted above. This component will be measured in subsequent periods at amortized cost (according to the effective interest method).

The issuance expenses totaled USD $55 thousand, of which USD $45 thousand are attributed to profit and loss, and USD $9 thousand were deducted from the amount received in respect of the primary contract.

As part of the valuation project that was carried out at the time of completion, the total net consideration received by the Company, USD $1,699 thousand, was first allocated to the conversion component and a financial derivative in respect of the conversion mechanism, which constitutes a financial liability that was measured initially and in subsequent reporting periods at fair value through profit or a loss, in accordance with the provisions of IFRS 9, "— Financial Instruments." The remaining amount was attributed to the debt component, which will be presented at amortized cost and at a discount rate of 370%.

In accordance with the above, the breakdown of the components of the convertible loan agreement as of the completion date is as follows:

---

| | |
|:---|:---|
|  | **Fair value** |
|  | **USD in<br> thousands** |
| Consideration attributed to the Loan, at amortized cost – host contract | 293 |
| Consideration attributed to the conversion component and the financial derivative | 1406 |
| Total consideration less the issuance expenses | 1699 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 15: — <u>CONVERTIBLE LOAN AND CONVERSION COMPONENT OF CONVERTIBLE LOAN AND WARRANTS</u>** (cont.)

The fair value estimate of the financial derivative component as of the completion date, as of December 31, 2023, and December 31, 2024 was calculated as part of a valuation that was carried out using the Monte Carlo model and a binomial model. The parameters used in the calculation of the fair value according to the aforementioned models are:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31<br> 2023** | **Completion<br> date** | **December 31<br> 2024** |
| Share price | 59.3 | 60.4 | 12.82 |
| Volatility – conversion component of loan | 55% | 55% | 106% |
| Volatility – warrants | 73% | 73% | 78% |
| Risk-free interest – conversion component | 3.8% | 3.85 | 4.2% |
| Risk-free interest – warrants | 3.6% | 3.6% | 4.2% |
| Life expectancy (years) | 1.17 | 1.25 | 0.17 |

---

Below is the movement in the conversion and financial derivative component:

---

| | | |
|:---|:---|:---|
|  | **Year ended on<br> December 31,<br> 2024** | **Year ended on<br> December 31<br> 2023** |
|  | **USD in<br> thousands** | **USD in<br> thousands** |
| Balance as of January 1 | 1002 |  |
| Initial recognition | 368 | 943 |
| Financing expenses (income) in respect of the revaluation of a financial derivative and the conversion component | 3639 | (35) |
| Revaluation recognized in OCI | 52 | 94 |
| Balance as of December 31 | 5061 | 1002 |

---

The measurement of the value of the conversion component and the financial derivative is classified under level 3 in the fair value hierarchy.

**Note 16: — <u>Taxes on income</u>**

A. <u>The tax rates applicable to the Company</u> 

The Israeli corporate income tax was 23% in 2024, 2023, and 2022.

A Company is taxable on its real capital gains at the corporate income tax rate in the year of sale.

B. <u>Deferred taxes</u> 

The Company has business losses and capital losses for tax purposes that are carried forward to the following years and amount to USD $62 million (NIS 226 million) as of December 31, 2024. Deferred tax assets were recognized in the financial statements in respect of these losses (up to the total liability for deferred taxes) at USD $860 thousand and USD $836 thousand for the years ended December 31, 2024 and December 31, 2023, respectively.

C. <u>Final tax assessments</u> 

Final tax assessments were issued for the Company, up to and including the 2020 tax year.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 16: — TAXES ON INCOME** (cont.)

D. <u>Deferred taxes</u> 

Composition:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Statements of<br> Financial Position** | **Statements of<br> Financial Position** | **Statements of profit or loss** | **Statements of profit or loss** | **Statements of profit or loss** | **Movement in other<br> comprehensive income<br> statement** | **Movement in other<br> comprehensive income<br> statement** | **Movement in other<br> comprehensive income<br> statement** |
|  | **December 31** | **December 31** | **For the year that ended on<br> December 31** | **For the year that ended on<br> December 31** | **For the year that ended on<br> December 31** | **For the year that ended on<br> December 31** | **For the year that ended on<br> December 31** | **For the year that ended on<br> December 31** |
|  | **2024** | **2023** | **2024** | **2023** | **2022** | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Deferred tax liabilities</u> |  |  |  |  |  |  |  |  |
| Loans from an interested party | (860) | (852) |  |  |  | (7) | (54) | (50) |
| Carryforward tax losses | 860 | 852 | 7 | 54 | 50 |  |  |  |
| Deferred tax revenues |  |  | 7 | 54 | 50 |  |  |  |
| Movement in other comprehensive income |  |  |  |  |  | (7) | (54) | (50) |
| Deferred tax assets (liabilities), net |  |  |  |  |  |  |  |  |

---

E. <u>Income taxes included under profit or loss</u> 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** |
|  | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Deferred taxes, see also Section D above |  | 7 |  | 54 |  | 50 |

---

**Note 17: — <u>Contingent liabilities and COMMITMENTS</u>**

A. For information regarding the contingent liability to the
IIA (see Note 12).

B. On May 31, 2009, the Company signed a research agreement
and a license agreement with a third party, according to which the third party would perform research for the Company for three years
in accordance with a predetermined research plan in exchange for a payment of USD $480 thousand. In addition, a third party granted the
Company a license to use the technology it had developed in exchange for royalties equal to 5% of product sales and the provision of
drug scanning services for a period of 15 years from the date the Company's sales commence, as well as 20% of the proceeds
from the sale of sub-licenses by the Company. In case the Company is obligated to pay royalties to another party in connection with
the same product, the aforementioned royalty rate shall be reduced to 3.5% and 15%, respectively.

In May 2013, the Company signed an amendment to the agreement. According to the amendment, the third party would perform research for the Company for another four years in accordance with a predetermined research plan in exchange for a payment of USD $480 thousand. In addition, the Company would pay royalties equal to 5% of the Company's revenues from product sales and the provision of drug scanning services, and 20% of the proceeds from the sale of sublicenses by the Company, as well as royalties at rates ranging from 2% to 7.5% for the sale of drug scanning products and additional receipts that the Company would receive from these products. In case the Company is obligated to pay royalties to another party in connection with the same product, the aforementioned royalty rate shall be reduced to 3.5%, 15%, and a rate ranging from 1.4% to 5.25%, respectively.

On January 19, 2016, the Company entered into an addendum to the agreement with the third party, under which the Company would receive a non-exclusive license to use stem cells for the production of a cell therapy for ALS. The license also included scientific research to be carried out in third-party research laboratories.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 17: — <u>Contingent liabilities and COMMITMENTS</u>** (cont.)

On March 24, 2020, the Company entered into an addendum to the agreement with the third party under which all the Company's contracts became a non-exclusive license to use stem cells to create a cell therapy. In return, the rate of all royalties was reduced to 4% (compared to 5%) of product sales for a period of 15 years from the start of sales, and the payment for sublicenses was reduced to 15% (compared to 20%), provided that it does not fall below 1.25% of the sales. Since the Company has an agreement to pay royalties to an additional third party, in this case the royalty rates would be reduced from 4% to 2% of the product sales, and the payment for the sub-licenses would be reduced to 10%. In addition, the Company would pay the aforementioned third party a payment for reaching milestones in the transplant product for the treatment of ALS according to the following rules:

&nbsp;&nbsp;&nbsp;&nbsp;A. USD $150 thousand at the beginning of clinical phase IIb.

&nbsp;&nbsp;&nbsp;&nbsp;B. USD $200 thousand at the beginning of clinical phase III.

&nbsp;&nbsp;&nbsp;&nbsp;C. USD $2 million when obtaining a marketing license for
a product to treat ALS in the US or Europe.

In addition, the Company paid an annual license maintenance fee of USD $50 thousand until 2019, which was reduced to USD $30 thousand per year from 2020 and until 15 years pass from the current agreement's execution. The annual license maintenance fees will be offset from the royalty payments.

As of December 31, 2024, the Company does not have royalties liability.

C. On August 31, 2009, the Company signed a license agreement
with a third party, according to which the third party granted the Company a license to use the technology developed in exchange for
the following payments:

An annual payment of USD $20 thousand, starting at the end of the fourth year from the date of signing the contract;

Milestone payments of up to USD $9,650 thousand;

Royalties at a rate of 3.5% – 5% of the sales (according to the terms set forth in the agreement) for a period of 20 years from the date the Company's sales commence in each country or the date the patent expires in each country, whichever is later, as well as 20% of the proceeds from the sale of sublicenses by the Company. In case that the Company is obligated to pay royalties to another party in connection with the same product, the aforementioned royalty rate shall be reduced to 3.5% and 15%, respectively. In addition, if the license becomes a non-exclusive license, the above payments will be reduced by 50%.

As of December 31, 2024, the Company has not yet made any payments in respect of the milestones.

D. On November 30, 2014, the Company signed a license agreement
with an academic institution in the United Kingdom. As part of the agreement, the Company would be given a license for the commercial
use of a Pluripotent stem cell line at a clinical level. It was agreed that the bulk of the payment to the academic institution would
be made upon reaching future milestones and as royalties on future sales, as follows: 30,000 pounds sterling (USD $45,000) would be paid
by the Company after receiving the Company's confirmation that the cells are suitable for human use; a sum of 50,000 pounds sterling
(USD $75,000) would be paid by the Company when the cells are used in clinical trials (that is, upon entering the phase clinical trials
phase with an ALS indication). The Company stated that if the cells are not used in clinical trials, no payment would be made for them.
The rate of royalties to be paid by the Company is 2% of the net revenue from the sale of a product to be developed.

As of December 31, 2024, the Company did not use the aforementioned cells.

E. On January 26, 2015, the Company entered into a research
and license agreement with Ramot at Tel Aviv University Ltd. (hereinafter, "Ramot") and scientist Professor Shimon Efrat,
for the development and commercialization of therapeutic products to accelerate the development of a cellular drug in the field of diabetes.
The aforementioned research supports the Company's technology for the differentiation of stem cells into insulin-secreting pancreatic
cells for the treatment of diabetes. Ramot would grant the Company a license to use Ramot's knowledge, which would be created as
part of the joint research, and Prof. Efrat would provide consulting services to the Company and join the Company's advisory board.
The agreement term for each product and each country where a patent is registered will be the longer of the two option as detailed: 1.
15 years from the date of the first sale of the product or the patent expiration date in the relevant country.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 17: — <u>Contingent liabilities and COMMITMENTS</u>** (cont.)

&nbsp;&nbsp;&nbsp;&nbsp;2. The patent expiration.

For the cooperation between the parties, the Company would pay Ramot royalties at a rate of 0.4% to 0.8% of product sales, depending on the product's progress according to regulatory milestones and the degree of use of Ramot's technology that would be created during the project, as stipulated in the agreement. In addition, royalties at the rate of 2.75% will be paid to the Company in return for granting a sublicense in the diabetes product, depending on reaching the milestone specified in the agreement, and royalties at a rate of 7% will be paid if the granted sublicense is for a product that incorporates Ramot's technology. It was also agreed that the Company would grant Ramot up to 200,000 options, without consideration, which would be granted depending on reaching regulatory milestones, at rates as follows: 30% of the options would be granted after holding a meeting with a regulator, prior to submitting the Investigational New Drug ("IND") application; 30% additional options would be granted after the submission of the IND application; and 40% additional options would be granted after receiving the IND approval. The grant of the aforementioned options is subject to Prof. Efrat continuing to advise the Company throughout various stages of the product's regulatory approval. The Board of Directors has authorized the grant of the aforementioned options.

In addition, Prof. Efrat was added to the Company's scientific advisory board, whereas the Company's Board of Directors authorized a private placement of 20,000 non-marketable options to Prof. Efrat, exercisable for USD $5,340 (NIS 20,000) of Shares of the Company. The options will vest over a period of 4 years and can be exercised until January 22, 2025, at an exercise price per share of USD $1.80.

As of December 31, 2024, the Company has no royalties liability in respect of the agreement.

F. On May 4, 2023, the Company and iTolerance, Inc. (hereinafter,
"iTolerance") signed a cooperation agreement for the implementation of the project (hereinafter, the "Cooperation Agreement"),
and on May 8, 2023, the Company, iTolerance, and the BIRD foundation signed a funding project and cooperation agreement (hereinafter,
the "BIRD agreement," and with the Cooperation Agreement, the "Agreements"). The Agreements were signed in connection
with obtaining the approval of the BIRD foundation, a binational Israeli and US R&D fund, whose purpose is to encourage and support
industrial collaborations between Israeli and US companies (hereinafter, the "BIRD Foundation") for the receipt of a grant
totaling USD $1 million (hereinafter, the "Grant"), which would be divided between the parties in equal parts, to support
the joint development of an innovative treatment in the field of diabetes by the Company and iTolerance, with a total budget of USD $2 million
for a period of 30 months (hereinafter, the "Grant period").

The total grants received in 2024 from the BIRD Foundation are USD $250 thousand.

As of December 31, 2024, the Company has an outstanding balance of USD $42 thousand in respect of deferred receivables from the BIRD Foundation.

G. On February 14, 2024, the Company entered into a non-binding memorandum
of understanding (hereinafter, the "MOU") for a merger with IMC Corp (Nasdaq: "IMCC"), a company whose shares
are traded in the United States on the Nasdaq Stock Market and in Canada on the Canadian Securities Exchange (CNSX) (hereinafter,
the "IMC"). IMC is incorporated under the laws of Canada.

On May 27, 2024, negotiations between the parties to sign a final agreement were terminated, inter alia, in light of regulatory changes in IMC's field of activity in the American market and in the German market, which are not related to the Company. In accordance with the separation agreement signed between the parties on that date, the loan that the Company provided to an IMC subsidiary within the framework of the aforementioned MOU, amounting to USD $300 thousand, will be repaid to the Company plus annual interest at a rate of 9% for the outstanding period, in 3 equal installments, the last of which was to be transferred to the Company no later than July 31, 2024 and to which the interest accrued during the period would be added. The balance of the loan was recorded in accounts receivable. As of June 30, 2024, the balance of the loan was USD $188 thousand and financing income was recorded in respect thereof amounting to USD $8 thousand. As of the date of these financial statements, the Company has collected all payments in accordance with the separation agreement, and as of December 31, 2024, there is no balance outstanding.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 17: — <u>Contingent liabilities and COMMITMENTS</u>** (cont.)

H. Agreement with Pluri Inc.

On July 17, 2024, the Company entered into a collaboration agreement with Pluri Inc. (Nasdaq: PLUR) (hereinafter, "Pluri") for the clinical manufacturing (outsourced) of the Company's products (hereinafter, the "Pluri Agreement") at Pluri's manufacturing facility in accordance with the Company's strategic plan.

The signing of the Pluri Agreement to manufacture the Company's products constitutes a milestone in the development of the ASTRORX<sup>®</sup> product, as part of the Company's preparation for a multi-site Phase IIA clinical trial (Phase A2), as well as in the development of the ISLETRX product in support of the Pre-IND submission together with iTolerance, for continuing the development procedures of the innovative diabetes treatment within the framework of the aforementioned collaboration and as preparation for the submission of an IND application in the future. In accordance with the agreement, the Company will grant Pluri the right to use the knowledge developed by the Company for the benefit of Pluri's production of the Company's products, with the first phase lasting up to 12 months, in consideration of approximately USD $70,000 to be paid in cash or through issuance of Company securities, as to be agreed upon by the parties.

I. On November 5, 2024, following approval by the Company's
Board of Directors, the Company entered into a definitive and binding merger agreement with the Swiss biopharmaceutical company NLS,
whose shares are traded in the United States on the Nasdaq Stock Exchange under the symbol "NLSP", which develops innovative
treatments for rare and complex disorders of the central nervous system, and which was approved by the General Shareholders Meeting on
January 30, 2025. Upon the closing of the transaction and subject to the cash balances of NLS and the Company, upon that date, the
current shareholders of the Company will hold up to 85% of the issued and paid-up share capital of NLS following the merger (hereinafter,
the "Merged Company"), and the shares of the Merged Company will be traded on Nasdaq. The closing of the merger transaction
is subject to fulfillment of conditions precedent.

The agreement stipulates a number of conditions precedent related, among others, to actions that NLS is required to take prior to the closing of the merger transaction, including regarding the arrangement of the continued trading of its shares on Nasdaq and its compliance with the threshold conditions required for this, which are expected to be examined by Nasdaq as part of the submission of the application for trading of the Merged Company close to the date of closing. (See Note 23C.)

J. On August 29, 2024, Dr. Kfir Molakandov was appointed
as the Company's VP of Research and Development.

**Note 18: — <u>EQUITY</u>**

A. <u>Composition of the share capital</u> 

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31** | **December 31** | **December 31** | **December 31** |
|  | **2024** | **2024** | **2023** | **2023** |
|  | **Authorized** | **Issued and<br> paid up** | **Authorized** | **Issued and<br> paid up** |
|  | **Number of shares** | **Number of shares** | **Number of shares** | **Number of shares** |
| Ordinary shares, p.v. NIS 0.1 per share (p.v. USD $0.03 per share) | 150000000 | 4193689 | 150000000 | 4193689 \* |

---

\* Adjusted retrospectively due to a reverse share split. See Notes 18I and 18K.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 18: — <u>EQUITY</u>** (cont.)

B. <u>Movement in share capital</u> 

Issued and paid-up capital:

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares** | **USD par value<br> in thousands** |
| <u>Balance as of January 1, 2023</u> | 36406747 | 1081 |
| Issuance of share capital | 5530152 | 157 |
| <u>Balance as of December 31, 2023</u> | 41936899 | 1238 |
| Reverse Share Split | (37743210) |  |
| <u>Balance as of December 31, 2024</u> | 4193689 | 1238 |

---

C. <u>The rights attached to shares</u> 

Holders of ordinary shares have the right to participate and vote in the Company's general meeting, the right to participate in the Company's profits in the event of the Company's liquidation, and the right to receive dividends, as declared.

D. On February 19, 2020, the Company completed a material
private placement, offering:

&nbsp;&nbsp;&nbsp;&nbsp;1. 645,706 non-marketable warrants (Series E1), each
of which was exercisable for one Share for an exercise price of about NIS 3; the warrants would be exercisable until September 30,
2020 (hereinafter, the "Series E1 Warrant").

The Series E1 Warrants' value, USD $173 thousand, was determined according to the Black-Scholes model based on the following assumptions:

---

| | |
|:---|:---|
| Dividend Yield For The Share (%) |  |
| Expected Share Price Volatility (%) | 67.14% |
| Risk-free Interest Rate (%) | 0.2% |
| Share Price (usd) | 1.00 |

---

On September 30, 2020, 638,708 Series E1 warrants totaling USD $170 thousand expired.

&nbsp;&nbsp;&nbsp;&nbsp;2. 645,706 non-marketable warrants, each of which was exercisable
for one Share for an exercise price of USD $1.46; the warrants were exercisable until December 31, 2021 (hereinafter, the "Series E2
Warrant").

The value of the Series E2 Warrants, USD $156 thousand, was determined according to the Black-Scholes model based on the following assumptions:

---

| | |
|:---|:---|
| Dividend yield for the share (%) |  |
| expected share price volatility (%) | 67.14% |
| Risk-free interest rate (%) | 0.2% |
| Share price (USD) | 1.02 |

---

The issuance of the Series E1 Warrants and Series E2 Warrants was approved by the Company's Board of Directors on February 13, 2020. The issuance of the shares that would result from the exercise of the warrants was approved for listing by the TASE on March 12, 2020.

On August 31, 2021, 67,884 Series E2 Warrants were exercised for USD $99 thousand (the exercise price).

On December 31, 2021, 577,882 Series E2 Warrants, totaling USD $140 thousand, expired.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 18: — <u>EQUITY</u>** (cont.)

E. On April 25, 2021, after receiving the approval of the
Company's Board of Directors on April 21, 2021, the Company completed an issuance in the amount of USD $6.85 million
by way of a private placement led by Clover Wolf, Clover Alpha (hereinafter, "Clover") and Alpha Capital Anstalt — European
investment fund, for USD $4.6 million and USD $2 million respectively, as well as a total of USD $0.22 million by 2 additional
investors (hereinafter, the "Consideration").

Below are the primary terms of the private placement:

7,861,752 Shares, as well as 7,861,752 non-marketable warrants for the purchase of up to 7,861,752 Shares, which were to be issued in three series; 3,930,876 Series A warrants; 1,965,438 Series B1 warrants; and 1,965,438 Series B2 warrants, under the conditions detailed below:

<u>The warrants terms</u>

Each warrant of Series A would be exercisable for one Share, starting from the date of issuance and until July 31, 2022, for an exercise price of NIS 3.5 (USD $1.08).

Each warrant of Series B1 would be exercisable for one Share, starting from the date of issuance and until April 3, 2023, for an exercise price of NIS 4.4 (USD $1.35)

Each warrant of Series B2 would be exercisable for one Share, starting from the occurrence of a vesting event until April 30, 2023, against a cash payment of an exercise price of NIS 4.4 (USD $1.35);

A "vesting event" was defined as the Company's completion of a public financing process in an amount not less than NIS 10,000,000 (USD $3,113,000) (net of interested party investments in the Company, as applicable) during the period that began after the completion of this issuance and ends on October 30, 2021 (see Note 18F).

The warrants' value, USD $2,389,000, was determined according to the Black-Scholes model based on the following assumptions:

---

| | |
|:---|:---|
| Expected share price volatility (%) | 74% – 75% |
| Risk-free interest rate (%) | 0.1% |
| Share price (USD) | 1.129 – 1.05 |

---

As of August 28, 2021, the receipt of the total Consideration according to the investment agreements was completed, at USD $6,859 thousand, and after deducting the issuance expenses, USD $346,000, the Company received a total of USD $6,513,000.

On April 30, 2023, 3,930,876 non-marketable equity-based Series B1 and B2 warrants expired.

F. On October 21, 2021, the Company's Board of Directors
gave its approval, following approval of the audit committee, for a private investment in the Company in the aggregate amount of USD
$2.94 million (NIS 9.45 million) by way of a private placement and the exercise of non-marketable warrants (Series A).

In accordance with the investment agreement, the 5 investors who had participated in the April 25, 2021 private placement led by Clover and Alpha Fund would exercise their Series A warrants early. In exchange for investors immediately exercising their Series A Warrants, in a total amount of USD $2.94, whose expiration date is July 31, 2022, and accordingly would inject an investment into the Company that totals USD $2.94 million, in return, such investors would be issued 2,158,783 Series C warrants, with an exercise price per warrant of USD $2 (NIS 7) until December 31, 2023.

Until December 31, 2021, 1,466,087 non-marketable Series A warrants were exercised, for which the Company received a total of USD $1,600 thousand. The fair value of the warrants, USD $604 thousand, was credited to share premium.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 18: — <u>EQUITY</u>** (cont.)

On January 10, 2022, the investment mentioned above was completed as part of the warrant exchange transaction, and the Company received the consideration USD $1,340 thousand, and thus the receipt of the total consideration according to the investment agreements was completed, totaling USD $2,940,000 (USD $2,792,000, net).

G. On October 21, 2021, the Company's Board of Directors,
following the audit committee's approval, approved the Company's entry into an investment agreement with each of Prof. Revel
and Mr. Ruggieri, who are interested parties in the Company (hereinafter, the "Investment Agreements" and the "Interested
Parties"). In the Investment Agreements, it was determined that in exchange for a total of USD $2.1 million (Prof. Revel — USD
$1.1 million; Mr. Ruggieri — USD $1 million), the Company would issue to them, in accordance with their
investment ratio, 1,550,478 Shares, so that Prof. Revel would be issued 804,383 Shares, and Mr. Ruggieri would be issued
746,095 Shares, and that in exchange for USD $1.5 million, the Company will repay loans that had been received from an interested
party before, whose repayment date has passed. Prof. Revel would be repaid USD $1.1 million by the Company, Mr. Ruggieri would
be repaid USD $0.4 million, and the remaining amount, USD $0.6 million, was received in cash from Mr. Ruggieri.

On December 7, 2021, the general meeting of shareholders authorized the Investment Agreements. On December 23, 2021, the full consideration was received and the transaction was completed.

H. On November 23, 2021, the Board of Directors approved
a private placement agreement (the "Placement") in the amount of USD $3.2 million (the "Investment Amount")
with Ilex Medical Ltd (hereinafter, the "Investor"). The agreement with the Investor was signed on November 24, 2021.

As part of the Placement, the Investor would be issued 2,345,216 ordinary shares. In addition, the Investor would be issued 1,407,130 non-marketable warrants eligible for conversion into 1,407,130 marketable shares without consideration. The offered warrants would be issued in two series. The warrants' exercise prices would be USD $2.3 and USD $2.7. The warrants would be exercisable from the date of their issuance until December 31, 2023 and December 31, 2024, respectively. The full consideration was received on December 28, 2021, and the Company issued shares and warrants in accordance with the Placement Agreement. As of December 31, warrants totaling 70,356 had expired.

I. On December 12, 2022, the shareholders' meeting
approved the increase of the Company's authorized share capital by 50,000,000 shares, no par value, and the capital increase,
respectively, so that after the capital increase, the authorized share capital of the Company was USD $2.9 million, divided into
100,000,000 ordinary shares.

On December 12, 2022, the Company published a shelf offering by way of rights. Under the shelf offering, shares were offered by way of rights to the Company's shareholders, in such a way that each shareholder who held 100 Shares would be entitled to purchase 1 rights unit. 1 rights unit consisted of 32 Shares, and the total price of each rights unit was USD $10. The total number of rights units offered was up to 14,623,392 rights units.

Until December 31, 2022, the Company received notices for 47,574 rights (in exchange for which 1,522,335 shares were issued as of the reporting date) for a total of USD $475 thousand.

By the end of the financing round on January 9, 2023, the Company received notices for 390,220 rights to purchase 7,507,052 Shares of the Company. The gross immediate consideration received by the Company for the rights issued according to the shelf offering totaled USD $2,204 thousand (the issuance expenses totaled USD $52 thousand).

On January 1, 2023, 2,175,800 Series 6 warrants expired.

J. During the year 2023, the shareholders' meeting approved
the increase of the Company's authorized share capital by 50,000,000 Shares, and the capital increase, respectively, so that
the authorized share capital of the Company after the capital increase would be USD $4.4 million, divided into 150,000,000 ordinary
shares.

K. On March 31, 2024, the Company executed a reverse share
split at a ratio of 1:10, whereby every ten Shares were consolidated into one ordinary share of NIS 1 par value. The reverse split was
also applied to all outstanding convertible securities as of the date of the split.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 19: — <u>SHARE-BASED PAYMENT</u>**

A. <u>Expense that was recognized in the financial statements</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended on December 31,** | **Year ended on December 31,** | **Year ended on December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Total expense arising from share-based payment transactions | 208 | 149 | 235 |

---

B. <u>Share-based payment plan</u> 

On March 28, 2022, the Company's Board of Directors adopted a new global options plan as part of the decision to evaluate the listing of the Company's shares on the Nasdaq Capital Market. The new plan is intended for the Company's employees, consultants, service providers, and officers (including directors) (hereinafter, the "New Plan"). The New Plan allows non-marketable options (hereinafter, the "Options") that can be exercised for the Company's shares to be granted at different exercise prices, as well as restricted share units. The New Plan entered into force on the day of its adoption by the Board of Directors, subject to the required submission to the tax authorities, in accordance with the law. The New Plan will expire at the end of 10 years from the aforementioned date.

C. On March 10, 2021, the general meeting of the shareholders
approved the grant of Options to the Company's former Chief Executive Officer (the "CEO") as part of his employment
agreement, as well as to the current chairman of the Company's Board of Directors as part of the engagement agreement, according
to which 500,000 Options were granted to the Company's CEO, each of which is exercisable into one Share. The exercise price of
the Options will be as follows: 300,000 options at an exercise price of USD $0.7 (NIS 2.3), 150,000 options at an exercise price of USD
$1 (NIS 3), and 50,000 options at an exercise price of USD $1.7 (NIS 5). The vesting period of the Options is three years, wherein
one-third of the Options are to mature after 1 year and the remaining Options are to mature linearly over eight quarters. The Options
were granted in the equity track under section 102 under the Company's standard conditions and in accordance with the Company's
option plan.

The Options will be exercisable for a period of 5 years from their grant date.

The CEO's Options' value of USD $62 thousand was determined according to the Black-Scholes model based on the following assumptions:

100,000 options were granted to the chairman of the Board of Directors, each of which is exercisable into one Share for an exercise price of USD $0.81 (NIS 2.68). The vesting period of the Options is one year from their grant date. The Options will be exercisable for a period of five years from their grant date. The Options were granted in the equity track under section 102 under the Company's standard conditions and in accordance with the Company's option plan.

The chairman of the Board of Directors' Options' value of USD $30 thousand was determined according to the Black-Scholes model based on the following assumptions:

---

| | |
|:---|:---|
| Dividend yield for the share (%) |  |
| Expected share price volatility (%) | 72% |
| Risk-free interest rate (%) | 0.3% |
| Share price (USD) | 1.1 |

---

D. On June 12, 2022, the shareholders' meeting approved
the grant of non-marketable options that can be exercised into Shares in a 1:1 ratio as follows: 708,000 options for the CEO, and
approximately 625,000 options for the chairman of the board (the "June Options").

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 19: — <u>SHARE-BASED PAYMENT</u>** (cont.)

The June Options will vest over a period of 36 months in equal quarterly installments at an exercise price of USD $0.7. The vesting of the June Options shall accelerate in certain cases, such as the sale of the Company, the Company's listing on the Nasdaq Capital Market, or raising over USD $10 million in equity. The June Options' exercise period is 10 years.

The June Options' value of USD $381 thousand was determined according to the Black-Scholes model based on the following assumptions:

---

| | |
|:---|:---|
| Dividend yield for the share (%) |  |
| Expected share price volatility (%) | 65% |
| Risk-free interest rate (%) | 3.1% |
| Share price (USD) | 0.475 |

---

E. On March 21, 2024, the Shareholders' Meeting approved
the grant of equity compensation to Mr. Assaf Shiloni, the Company's CEO, comprising 139,558 restricted share units ("RSUs")
that will vest into up to 139,558 ordinary shares. The RSUs will vest into shares in 36 equal monthly installments, over a total period
of 3 years, commencing on the date of approval of the grant by the Board of Directors.

The share units will vest immediately, in part or in full, in the following circumstances: Immediate vesting of 20% of the RSUs that have not yet vested in the event of a cumulative equity raise (including equity from the exercise of warrants) amounting to USD $10 million or more commencing from the date of approval of the grant by the Board of Directors; Immediate vesting of 30% of the restricted share units that have not yet vested upon listing of the Company's shares for trading in the United States or in the event that the Company merges with a company listed on a U.S. stock exchange; and immediate vesting of all restricted share units that have not yet vested in the event of a change of control.

In 2024, expenses of USD $63 thousand were recognized with respect to the grant of these RSUs.

In light of the termination of Mr. Assaf Shiloni's employment, 96,911 of the RSUs expired.

F. On March 21, 2024, the Shareholders' Meeting approved
the grant of equity compensation to Mr. Ronen Twito, the Executive Chairman of the Company's Board of Directors, comprising
209,337 RSUs that will vest into up to 209,337 ordinary shares. The RSUs will vest into shares in 36 equal monthly installments, over
a total period of 3 years, commencing on the date of approval of the grant by the Board of Directors. The RSUs will vest immediately,
in part or in full, in the following circumstances: Immediate vesting of 25% of the RSUs that have not yet vested in the event of a cumulative
equity raise (including equity from the exercise of warrants) of USD $10 million or more commencing from the date of approval of
the grant by the Board of Directors; immediate vesting of 60% of the RSUs that have not yet vested upon the listing of the Company's
shares for trading in the United States or in the event that the Company merges with a company listed on a U.S. stock exchange;
and immediate vesting of all RSUs that have not yet vested in the event of a change of control.

In 2024, expenses of USD $145 thousand were recognized in respect of the grant of these RSUs.

As of December 31, 2024, 63,221RSUs had vested.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 19: — <u>SHARE-BASED PAYMENT</u>** (cont.)

G. <u>Movement throughout the year</u> 

Below is a table that describes the changes in the number of share options and their weighted average exercise price:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **2024** | **2024** | **2023** | **2023** | **2023** |
|  | **Number of<br> Options** | **Weighted<br> average<br> exercise price** | **Number of<br> Options** |  | **Weighted<br> average<br> exercise price** |
|  | **USD** | **USD** | **USD** |  | **USD** |
| Share options outstanding at the beginning of<br> year | 222811 | 1.08 | 248100 | (\*) | 1.38 |
| Share options granted during the year | 348895 | 0.08 |  |  |  |
| Share options that expired and were forfeited during the year | (115552) | 4.06 | (25289) |)(\*) | 4.07 |
| Share options outstanding at end of the year | 456154 | 0.56 | 222811 | (\*) | 1.08 |
| Share options exercisable at the end of the year | 351987 | 0.80 | 218644 | (\*) | 1.09 |

---

\* Adjusted retrospectively due to the reverse share split. See Note 18K.

The weighted average remaining contractual life of the share options as of December 31, 2024, was 2.36 years and as of December 31, 2023 was 4 years. The share options' exercise price range as of December 31, 2024 was USD $0.08-4.11 and as of December 31, 2023 was USD $0.64-4.14.

**NOTE 20: — <u>ADDITIONAL DETAILS OF PROFIT OR LOSS ITEMS AND OTHER COMPREHENSIVE INCOME ITEMS</u>**

A. <u>Research and development expenses</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended on December 31,** | **Year ended on December 31,** | **Year ended on December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Wages, salaries and related expenses | 905 | 1250 | 2513 |
| Share-based payments | 19 |  | (3) |
| Materials | 68 | 75 | 766 |
| Office leasing and maintenance | 44 | 72 | 240 |
| Consultants and subcontractors | (134) | 126 | 1514 |
| Patent registration | 40 | 52 | 84 |
| Depreciation and amortization | 226 | 525 | 481 |
| Vehicles | 13 |  | 1 |
| Travel abroad expenses | 13 | 16 | 23 |
| Less – Participation of IIA and others | (202) | (508) | (1129) |
|  | 992 | 1608 | 4490 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**NOTE 20: — <u>ADDITIONAL DETAILS OF PROFIT OR LOSS ITEMS AND OTHER COMPREHENSIVE INCOME ITEMS</u>** (cont.)

B. <u>Marketing expenses</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended on December 31,** | **Year ended on December 31,** | **Year ended on December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Wages, salaries and related expenses |  | 56 | 175 |
| Advertising and public relations |  | 25 | 89 |
|  |  | 81 | 264 |

---

C. <u>General and administrative expenses</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended on December 31,** | **Year ended on December 31,** | **Year ended on December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| Wages, salaries and related expenses | 131 | 416 | 679 |
| Professional services and consultants | 169 | 269 | 362 |
| Legal fees | 79 | 177 | 176 |
| Office leasing and maintenance | (79) | 22 | 42 |
| Share-based payments: |  |  |  |
| employees, consultants, and directors | 189 | 130 | 245 |
| Directors' fees | 182 | 167 | 197 |
| Vehicles expenses | 7 | 8 | 13 |
| Depreciation and amortization | 187 | 95 | 96 |
| Other general and administrative expenses | (72) | 19 | (10) |
|  | 793 | 1303 | 1800 |

---

D. <u>Financing expenses, net</u> 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year that ended on December 31,** | **Year that ended on December 31,** | **Year that ended on December 31,** |
|  | **2024** | **2023** | **2022** |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** |
| <u>Financing income</u> |  |  |  |
| Exchange rate differences | 1 |  | 8 |
| Other financing income | 5 | 36 | 14 |
|  | 6 | 36 | 22 |
| <u>Financing expenses</u> |  |  |  |
| Exchange rate differences | 48 | 8 |  |
| Financing expenses in respect of lease | 19 | 82 | 73 |
| Financing expenses in respect of short-term credit and bank fees | 26 | 24 | 10 |
| Revaluation of the conversion component and options related to a convertible loan and a loan from an interested party | 5044 | 239 | 200 |
|  | 5137 | 353 | 283 |
| Financing expenses, net | 5131 | 317 | 261 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 21: — <u>Loss per share</u>**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** | **Year that ended on December 31** |
|  | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** |
|  | **Weighted<br> number of<br> shares** | **Loss<br> attributable<br> to the<br> Company's<br> shareholders** | **Weighted<br> number of<br> shares** | **Loss<br> attributable<br> to the<br> Company's<br> shareholders** | **Weighted<br> number of<br> shares** | **Loss<br> attributable<br> to the<br> Company's<br> shareholders** |
|  | **Thousands** | **USD in<br> thousand** | **Thousands** | **USD in<br> thousand** | **Thousands** | **USD in<br> thousand** |
| Number of shares and total loss | 4193 | 7178 | 4193 | 3255 | 3487 | 6765 |
| Adjustment for bonus shares and rights issue |  |  | 49 |  | 40 |  |
| For the purpose of calculating basic and diluted loss | 4193 | 7178 | 4242 | 3255 | 3527 | 6765 |

---

The loss per share for 2023 was restated following the reverse share split and the loss per share for 2022 was restated to reflect the reverse share split and a rights offering.

**Note 22: — <u>BALANCES AND TRANSACTIONS WITH interested AND RELATED PARTIES</u>**

A. <u>Balances with interested and related parties:</u> 

<u>December 31, 2024</u>

---

| | | |
|:---|:---|:---|
|  | **Interested<br> parties** | **Key<br> management<br> personnel** |
|  | **USD in thousands** | **USD in thousands** |
| Loans from an interested party | 860 |  |
| Accounts payable |  | 142 |
| Convertible loan | 1512 |  |
| Liability in respect of conversion component and options of convertible loan | 5061 |  |
| Total | 7433 | 142 |

---

<u>December 31, 2023</u>

---

| | | |
|:---|:---|:---|
|  | **Interested<br> parties** | **Key<br> management<br> personnel** |
|  | **USD in thousands** | **USD in thousands** |
| Loans from an interested party | 852 |  |
| Accounts payable |  | 200 |
| Convertible loan | 230 |  |
| Liability in respect of conversion component and options of convertible loan | 1002 |  |
| Total | 2084 | 200 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 22: — <u>BALANCES AND TRANSACTIONS WITH interested AND RELATED PARTIES</u>** (cont.)

B. <u>Transactions with interested and related parties:</u> 

<u>Year ended December 31, 2024</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Key<br> management<br> personnel** | **Key<br> management<br> personnel** | **Interested<br> party** | **Interested<br> party** |  |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |  |
| Research and development expenses |  | 254 |  | 130 | \* |
| General and administrative expenses |  | 634 |  |  |  |
| Financing expenses | |  | | 328 |  |
|  | | 888 | | 458 |  |

---

\* Estimated value of services provided to the Company by an interested party for no consideration.

<u>Year ended December 31, 2023</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Key<br> management<br> personnel** | **Key<br> management<br> personnel** | **Interested<br> party** | **Interested<br> party** |  |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |  |
| Research and development expenses |  | 298 |  | 130 | \* |
| General and administrative expenses |  | 760 |  |  |  |
| Financing expenses | |  | | 239 |  |
|  | | 1,058 | | 369 |  |

---

\* Estimated value of services provided to the Company by an interested party for no consideration.

<u>Year ended December 31, 2022</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Key<br> management<br> personnel** | **Key<br> management<br> personnel** | **Interested<br> party** | **Interested<br> party** |  |
|  | **USD in thousands** | **USD in thousands** | **USD in thousands** | **USD in thousands** |  |
| Research and development expenses |  | 417 |  | 143 | \* |
| General & administrative expenses |  | 1247 |  | 9 |  |
| Financing expenses | |  | | 200 |  |
|  | | 1,664 | | 352 |  |

---

\* Estimated value of services provided to the Company by an interested party for no consideration.

C. <u>Compensation and benefits to related parties and interested parties</u>

&nbsp;&nbsp;&nbsp;&nbsp;1. Compensation of office holders employed by the Company:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** |
|  | **Amount** | **Amount** | **Amount** | **Amount** | **Amount** | **Amount** |
|  | **Number of<br> people** | **USD in<br> thousands** | **Number of<br> people** | **USD in<br> thousands** | **Number of<br> people** | **USD in<br> thousands** |
| Short-term employee benefits | 4 | 355 | 4 | 752 | 6 | 1234 |
| Share-based payment | 1 | 42 | 1 | 75 | 3 | 149 |
|  |  | 397 |  | 827 |  | 1383 |

---

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 22: — <u>BALANCES AND TRANSACTIONS WITH interested AND RELATED PARTIES</u>** (cont.)

&nbsp;&nbsp;&nbsp;&nbsp;2. Compensation of office holders and interested parties (including
directors) who are not employed by the Company:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year that ended December 31,** | **Year that ended December 31,** | **Year that ended December 31,** | **Year that ended December 31,** | **Year that ended December 31,** | **Year that ended December 31,** |
|  | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** |
|  | **Amount** | **Amount** | **Amount** | **Amount** | **Amount** | **Amount** |
|  | **Number of<br> people** | **USD in<br> thousands** | **Number of<br> people** | **USD in<br> thousands** | **Number of<br> people** | **USD in<br> thousands** |
| Short-term benefits\* | 5 | 325 | 9 | 176 | 11 | 219 |
| Share-based payment | 1 | 166 | 1 | 55 | 1 | 202 |
|  |  | 491 |  | 231 |  | 421 |

---

\* Of this amount, benefits in respect of directors amount to approx. USD $48 thousand.

&nbsp;&nbsp;&nbsp;&nbsp;3. The Company's Chief Scientist, who is also an interested
party, provides services to the Company for no consideration (see section b above).

&nbsp;&nbsp;&nbsp;&nbsp;4. Regarding the issuance of shares and options to related parties
and interested parties, see Notes 18 and 19.

&nbsp;&nbsp;&nbsp;&nbsp;5. Regarding loans from interested parties, see Note 9.

&nbsp;&nbsp;&nbsp;&nbsp;6. Regarding the loan that includes a share conversion component
and an options component, see Note 15.

&nbsp;&nbsp;&nbsp;&nbsp;7. On December 12, 2022, Prof. Revel and Mr. Ruggieri
informed the Company that their voting agreement was void. In accordance with discussions held at the Board of Directors meeting on March 27,
2023, the Company does not consider Prof. Revel as its controlling shareholder as of this date, and accordingly, from that date
on, the Company does not have a controlling shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;8. Agreement with Ronen Twito Executive Chairman and CEO.

On March 21, 2024, the general meeting of the Company's shareholders approved a revised service agreement with Mr. Twito, effective from February 4, 2024, under which, in addition to his services as Executive Chairman of the board, Mr. Twito will serve as President of the Company. The terms of employment are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;A. Scope of employment — 70%. If the Company's shares are listed for trading in the US
 and/or the Company merges with a Nasdaq listed Company, the scope of employment will automatically increase to 100% and the
 compensation will be revised accordingly.

Annual salary of NIS 600,000, (USD $165,600) which will increase to NIS 857,400 (USD $236,640) in the event that the Company's shares are listed for trading in the United States, as described above, and an annual bonus of up to an amount equal to six months' salary, subject to the discretion of the Board. The employment agreement also provides that either party may terminate the employment agreement with six months' prior notice, and that Mr. Twito will be subject to 12-month non-competition and non-solicitation clauses. The employment agreement also provides for standard confidentiality provisions, reimbursement for certain expenses, as well as indemnity, exemption, and insurance provisions.

On October 22, 2024, Mr. Ronen Twito was appointed CEO of the Company concurrently with his role as Executive Chairman of the Board of Directors, which was subsequently approved on January 30, 2025 by the Company's shareholders meeting.

In addition, the shareholders meeting approved Mr. Ronen Twito's revised compensation terms as Executive Chairman and CEO, effective upon closing of the Merger.

In addition, the grant of 157,995 RSUs of the Company was approved with a vesting period of 24 months commencing on the date of approval by the Board of Directors.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 22: — <u>BALANCES AND TRANSACTIONS WITH interested AND RELATED PARTIES</u>** (cont.)

---

| | |
|:---|:---|
| B. | The revised terms of the agreement are: |
|  | Annual salary of USD $370,188 (including social benefits) which will increase to USD $413,743 upon the combined company completing an equity raise greater than USD $10 million accumulated following the Merger (a "Trigger Financing") and a bonus, subject to the discretion of the Board. The employment agreement also provides that either party may terminate the employment agreement with nine months' prior notice, a 3-month adaptation period, and the requirement that Mr. Twito will be subject to a 12-month non-competition and non-solicitation clauses. The employment agreement also provides for standard confidentiality provisions, reimbursement for certain expenses as well as [standard] indemnity, exemption, and insurance provisions. |

---

---

| | |
|:---|:---|
| 9. | Employment agreement with the former CEO of the Company |
|  | On February 1, 2021, Mr. Assaf Shiloni (hereinafter, "Mr. Shiloni") began serving as CEO of the Company. Mr. Shiloni concluded his role on October 25, 2024. |
|  | Below are the main terms of such employment: |

---

&nbsp;&nbsp;&nbsp;&nbsp;A. Annual salary of USD $231,891 (including social benefits)
and a bonus of up to 6 months' salary, subject to the discretion of the Board. The employment agreement also provided that either
party could terminate the employment agreement with six months' prior notice, and that Mr. Shiloni would be subject to
a 12-month non-competition and non-solicitation clauses. The employment agreement also provided for standard confidentiality
provisions, reimbursement for certain expenses including leasing a car, as well as [standard] indemnity, exemption, and insurance provisions.

**Note 23: — <u>SUBESEQUENT Events</u>**

A. <u>Conditions precedent remaining for the completion of the merger transaction with NLS and the extension of the final deadline for its completion:</u> 

---

| | |
|:---|:---|
| 1. | On February 2, 2025, the Company announced that it continues to work jointly with NLS vis-a-vis various regulatory bodies (including the U.S. Securities and Exchange Commission (the "SEC") and the Nasdaq Stock Exchange) in order to obtain all necessary approvals required for the completion of the merger transaction. In addition, NLS is taking steps to convene a meeting of its shareholders to approve the merger transaction as soon as possible.<br>Furthermore, in order to obtain all the aforementioned approvals, the Company and NLS agreed to extend the final date for completion of the merger transaction by 90 days, i.e. until April 30, 2025. |
|  | On February 28, NLS, together with the Company, announced that they submitted an amended F4/A1 statement to the SEC regarding the proposed merger. |

---

&nbsp;&nbsp;&nbsp;&nbsp;2. As of the date of approval of these financial statements,
the merger transaction with NLS has received the approvals of the District Court in Lod, the TASE, and the Israel Securities Authority.

B. <u>Kadimastem and NLS report on a private fundraising of up to USD $3 million for NLS and the signing of a framework agreement for an investment of USD $25 million in NLS.</u> 

On March 31, 2025, the Company, along with NLS, announced an additional private fundraising round for NLS in the amount of USD $3 million at a share price of USD $1.65, reflecting a premium of 10% over the NLS share price (hereinafter, "the fundraising"), with USD $2 million of the total fundraising completed as of the date of [these financial statements], and the remaining amount of up to USD $1 million, subject to the registration of the Shares and the approval of the NLS shareholders' meeting, as part of the actions being taken towards completion. At the same time, a framework agreement for an investment of USD $25 million in NLS was also signed.

**KADIMASTEM LTD.<br> NOTES TO FINANCIAL STATEMENTS**

**Note 23: — <u>SUBESEQUENT Events</u>** (cont.)

The purpose of the aforementioned fundraising efforts is to secure financing for the merger transaction and for post-merger working capital, as well as other general objectives.

The completion of the fundraising round and the signing of the aforementioned framework agreement for investment, along with the previous private fundraising rounds conducted by NLS in a joint effort with the Company in October 2024 and January 2025, amount to a total of approximately USD $6.7 million, as well as an additional future investment framework of USD $25 million. These represent a significant milestone in the efforts to complete the merger transaction, strengthen the equity of the Merged Company, and develop the Company's products following the completion of the merger transaction, including the conduct of clinical trials.

C. <u>Conversion Notice re- Convertible Loan into Company Shares, in the Amount of USD $560,479</u> 

On April 14, 2025, the Company announced that, Mr. Julien Ruggieri, a significant shareholder in the Company, provided the Company a written notice of his decision to convert the remaining USD $500,000 principal balance of the convertible loan granted by him to the Company, excluding accrued interest of USD $60,479, into 279,952 ordinary shares of the Company, no par value and 349,940 non-listed warrants, exercisable into ordinary shares (the "Ruggieri Warrants"). The conversion was carried out in accordance with the terms of the convertible loan agreement dated November 22, 2023.

As a result of the accrued interest amounting at USD $60,479 (approximately NIS 222,867), on May 4, 2025, the Company announced that it will issue to Mr. Ruggieri 36,233 ordinary shares, no par value; and 9,960 non-listed Ruggieri Warrants, exercisable into ordinary shares. The Ruggieri Warrants shall have an exercise price equal to 110% of the conversion price (NIS 6.77) and shall be exercisable for a period of 42 months from the date of issuance.

D. <u>Loan agreement in the amount of NIS 1 million (USD $269 thousand), on beneficial terms, between the Company and Prof. Michel Revel</u> 

On April 23, 2025, the Company announced that on April 22, 2025, the Company's audit committee and Board of Directors approved the Company's entry into a loan agreement, on beneficial terms, with Prof. Michel Revel, the Company's Chief Scientific Officer, who is also a significant shareholder and a director of the Company (the "Loan Agreement", accordingly), in accordance with the terms as follows:

&nbsp;&nbsp;&nbsp;&nbsp;1. Upon approval by the Company's Board of Directors,
Prof. Revel shall provide the Company with a loan in the amount of NIS 1 million (USD $269 thousand). The loan bears no interest
and is not linked to any index and unsecured.

&nbsp;&nbsp;&nbsp;&nbsp;2. The loan shall remain in effect for a period of one year,
which shall automatically renew for consecutive 12-month periods, unless the parties agree to an earlier repayment in writing, at
least 30 days prior to the end of the applicable term.

&nbsp;&nbsp;&nbsp;&nbsp;3. Subject to the approval of the Company's general meeting
of shareholders, the loan shall be converted into Company shares, at the earlier of: (i) a date close to the closing date of the
Company's merger with NLS, if and when completed, at the market price as that time (calculated as the average share price of the
14 trading days prior to the conversion date); or (ii) alternatively, if the Company conducts an equity financing round in
proximity to the completion of the merger, any other equity financing.

## Exhibit 99.3

**Exhibit 99.3**

**Kadimastem Ltd. & NLS Pharmaceutics Ltd.**

**UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS**

 

*The following unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X under the Securities Act of 1933, as amended. The following information and all other information contained in the Unaudited Pro Forma Condensed Combined Financial Statements contained elsewhere in this Report on Form 6-K reflects a notice of a reverse split with the commercial registry of the Canton of Zurich, Switzerland, on September 27, 2024, that became effective in Switzerland on September 27, 2024. The reverse stock split was at a ratio of 1-for-40.*

The following unaudited pro forma condensed combined financial statements combine the historical financial information of Kadimastem Ltd., an Israeli publicly traded company limited by shares (TASE: KDST) ("Kadimastem") and the financial statements of NLS Pharmaceutics Ltd., a corporation incorporated under the laws of Switzerland ("NLS"), giving effect to NLS's acquisition of Kadimastem. On November 4, 2024, NLS, NLS Pharmaceutics (Israel) Ltd., an Israeli company and a wholly owned subsidiary of NLS ("Merger Sub") and Kadimastem entered into an Agreement and Plan of Merger, which was further amended on January 30, 2025, February 17, 2025, May 5, 2025, June 5, 2025, July 1, 2025, July 18, 2025, and August 29, 2025 (collectively, the "Merger Agreement"), pursuant to which (i) Merger Sub will merge with and into Kadimastem, with Kadimastem as the surviving company (the "Merger"), and (ii) at the effective time of the Merger (the "Effective Time"), each issued and outstanding ordinary share of Kadimastem, no par value ("Kadimastem Ordinary Share") will be exchanged for and automatically converted into the right to receive from NLS that certain number of fully paid and nonassessable common shares, 0.03 Swiss Franc (CHF) par value per share of NLS (the "NLS Common Shares") pursuant to a formula and in accordance with the terms of the Merger Agreement (the "Exchange Ratio"). The initial Exchange Ratio was estimated to result in Kadimastem shareholders holding 85% of the issued and outstanding NLS Common Shares, subject to certain adjustments as of the closing of the transactions contemplated by the Merger Agreement (the "Closing") of the Merger, including as a result of estimated cash at the Measurement Date (as defined in the Merger Agreement) of NLS and Kadimastem and estimated indebtedness of NLS at the Measurement Date. The initial targeted fully diluted share split of 85%/15% was subject to adjustment pursuant to the terms of the Merger Agreement, including estimated closing cash of NLS and Kadimastem and estimated closing indebtedness of NLS. Based on the cash proceeds from NLS's financing transactions from October 2024 through June 2025 (for more information please see "NLS's Management's Discussion and Analysis of Financial Condition and Results of Operations — Financing Activities" contained in NLS's Report on Form 6-K furnished to the Securities and Exchange Commission ("SEC") on October 6, 2025 and in NLS's Annual Report on Form 20-F for the year ended December 31, 2024 filed with the SEC on May 16, 2025), the parties have approved at the extraordinary general meeting of the shareholders of NLS on September 29, 2025 that the fully diluted share split at the Closing will be 84.4% to Kadimastem shareholders and 15.6% to NLS shareholders. For accounting purposes, Kadimastem is determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) Kadimastem security holders are expected to own approximately 84% of the voting interests of the combined company immediately following the Closing; (ii) directors appointed by Kadimastem will constitute the majority of the board of directors of the combined company; and (iii) employees of Kadimastem will constitute the majority of the management of the combined company. The Merger is anticipated to be accounted for using the acquisition method (as a reverse triangular merger), with goodwill and other identifiable intangible assets recorded in accordance with International Financial Reporting Standards ("IFRS"), as applicable to be determined at the time of Merger.

Kadimastem will be treated as the accounting acquirer, Kadimastem's assets and liabilities will be recorded at their pre-combination carrying amounts and the historical operations that are reflected in the financial statements will be those of Kadimastem. NLS's assets and liabilities will be measured and recognized at their fair values as of the transaction date, and with the assets and liabilities of Kadimastem along with the results of operations of Kadimastem and NLS after the consummation of the Merger. The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date.

The unaudited pro forma combined balance sheet as of June 30, 2025, assumes that the Merger took place on June 30, 2025, and reflects the combined historical balance sheets of Kadimastem and NLS. The unaudited pro forma combined statement of operations for the six months ended June 30, 2025, assumes the Merger took place on January 1, 2024. The unaudited pro forma combined statement of operations for the twelve months ended December 31, 2024, assumes the Merger took place on January 1, 2024. Each statement presents the combined historical results of operations of Kadimastem and NLS, giving effect to pro forma adjustments that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the separate Kadimastem and NLS historical financial statements, and their respective management's discussion and analysis of financial condition and results of operations. Kadimastem's historical audited financial statements for the twelve months ended December 31, 2024 and NLS's historical audited consolidated financial statements for the years ended December 31, 2024 are included elsewhere in this Report on Form 6-K. The historical financial statements of Kadimastem and NLS have been adjusted to give pro forma effect to events in accordance with Article 11 of Regulation S-X under Securities Act of 1933, as amended.

The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed and have been made solely for the purpose of providing unaudited pro forma condensed combined financial statements. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company's future results of operations and financial position. The actual amounts recorded as of the completion of the Merger may differ materially from the information presented in these unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that would have been realized had Kadimastem and NLS been a combined company during the specified period.

The unaudited pro forma adjustments represent NLS's best estimates based on currently available information and assumptions management believes are reasonable, as described in the accompanying notes. In summary, the unaudited pro forma condensed combined financial statements reflect the following adjustments: (1) payments for transaction-related costs; (2) the conversion of the convertible component of Kadimastem's loan and the exercise of warrants, resulting in an increase to the cash balance; (3) the recording of goodwill as part of the Merger; (4) the conversion of related-party loans by Kadimastem into equity; (5) the recording of accruals for transaction-related costs; (6) the elimination of Kadimastem's share capital and share premium, and NLS's accumulated deficit in connection with the reverse triangular merger; and (7) the recording of NLS Common Shares issued as part of the Merger to the Kadimastem shareholders, as Kadimastem will be the surviving operating entity for accounting purposes.

**Kadimastem Ltd. & NLS Pharmaceutics Ltd.**

**Unaudited Pro Forma Condensed Combined Balance Sheets**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** |
|  | **Kadimastem<br> Ltd.** | **NLS<br> Pharmaceutics<br> Ltd. And <br> Subsidiaries** | **Pre-Merger<br> Transaction<br> Accounting<br> Adjustments** | **Notes** | **Transaction<br> Accounting<br> Adjustments** | **Pro Forma<br> Combined** |
| **ASSETS:** | | | |  | | |
| Current assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $298932 | $3072376 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— |  | $1952409 (A) | $5073717 |
|  |  |  |  |  | (50000) (B) |  |
|  |  |  |  |  | (200000) (B) |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable | 55753 |  |  |  |  | 55753 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets |  | 963511 |  |  |  | 963512 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 354685 | 4035887 |  |  | 1702409 | 6092982 |
| Non Current assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Intangible assets-In-process research and development (IPR&D) & goodwill |  |  |  |  | 16404422 (K) | 16404422 |
| &nbsp;&nbsp;&nbsp;Deferred offering costs |  | 296154 |  |  |  | 296154 |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 106168 | 5303 |  |  |  | 111471 |
| &nbsp;&nbsp;&nbsp;Other assets |  | 283 |  |  |  | 283 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-current assets | 106168 | 301740 |  |  | 16404422 | 16812330 |
| **Total Assets** | $**460853** | $**4337628** | $— |  | $**18106831** | $**22905312** |
| **LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):** |  |  |  |  |  |  |
| Current liabilities: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable, including related party of $10,000 as of June 30, 2025, for NLS | 659513 | 1021052 |  |  |  | 1680565 |
| &nbsp;&nbsp;&nbsp;Related party short-term loan | 1081257 |  |  |  | (1081257) (A) |  |
| &nbsp;&nbsp;&nbsp;Other accrued liabilities | 672301 | 434069 |  |  | 150000 (B) | 1356370 |
|  |  |  |  |  | 100000 (B) |  |
| &nbsp;&nbsp;&nbsp;Loan from bank | 351073 |  |  |  |  | 351073 |
| &nbsp;&nbsp;&nbsp;Convertible loan | 1115065 |  |  |  | (1115065) (A) |  |
| &nbsp;&nbsp;&nbsp;Conversion component of convertible loan and warrants | 11662604 |  |  |  | (11662604) (A) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 15541813 | 1455121 |  |  | (13608926) | 3388008 |
| Total liabilities | 15541813 | 1455121 |  |  | (13608926) | 3388008 |
| Commitments and Contingencies |  |  |  |  |  |  |
| Shareholders' (deficit) equity: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Share Capital, no par value, 4,649,940 shares issued and outstanding at June 30, 2025 | 1324178 |  |  |  | (1324178) (H) |  |
| &nbsp;&nbsp;&nbsp;Share premium | 64847190 |  |  |  | (64847190) (H) |  |

---

**Kadimastem Ltd. & NLS Pharmaceutics Ltd.**

**Unaudited Pro Forma Condensed Combined Balance Sheets — (Continued)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** | **As of June 30, 2025** |
|  | **Kadimastem<br> Ltd.** | **NLS<br> Pharmaceutics<br> Ltd. And <br> Subsidiaries** | **Pre-Merger<br> Transaction<br> Accounting<br> Adjustments** | **Notes** | **Transaction<br> Accounting<br> Adjustments** | **Notes** | **Pro Forma<br> Combined** |
| &nbsp;&nbsp;&nbsp;Preferred participation certificates, CHF 0.03 ($0.0369) par value; 583,198 registered certificates issued and outstanding at June 30, 2025 |  | 21424 |  |  |  |  | 21424 |
| &nbsp;&nbsp;&nbsp;Preferred shares, CHF 0.03 ($0.0369) par value; 1,249,904 registered shares issued and outstanding at June 30, 2025 and Pro forma CHF 0.03 ($0.03) par value 495,359 registered shares and outstanding, respectively |  | 42539 | (28452) | (C) |  |  | 14087 |
| &nbsp;&nbsp;&nbsp;Common shares, CHF 0.03 ($0.0369) par value; 4,152,056 registered shares issued and outstanding at June 30, 2025 and Pro forma CHF 0.03 ($0.03) par value, 55,430,400 registered shares issued and outstanding, respectively |  | 153141 | 28452 | (C) | 1901330 | (J) | 2086694 |
|  |  |  | 3771 | (D) |  |  |  |
| &nbsp;&nbsp;&nbsp;Additional paid-in-capital | 8521873 | 77361856 | (3771) | (D) | 15811335 | (A) | 108019300 |
|  |  |  |  |  | 1324178 | (H) |  |
|  |  |  |  |  | 64847190 | (H) |  |
|  |  |  |  |  | (74346453) | (I) |  |
|  |  |  |  |  | (1901330) | (J) |  |
|  |  |  |  |  | 16404422 | (K) |  |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (87734255) | (74805306) |  |  | (350000) | (B) | (88584255) |
|  |  |  |  |  | (150000) | (B) |  |
|  |  |  |  |  | 74455306 | (I) |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation/Accumulated other comprehensive loss | (2039946) | 108853 |  |  | (108853) | (I) | (2093946) |
| Total shareholders' (deficit) equity | (15080960) | 2882507 |  |  | 31715757 |  | 22905312 |
| **Total Liabilities and Shareholders' (Deficit) Equity** | $**460853** | $**4337628** | $— |  | $**18106831** |  | $**22905595** |

---

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

**Kadimastem Ltd. & NLS Pharmaceutics Ltd.**

**UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Six Months Ended June 30, 2025** | **For the Six Months Ended June 30, 2025** | **For the Six Months Ended June 30, 2025** | **For the Six Months Ended June 30, 2025** | **For the Six Months Ended June 30, 2025** |
|  | **Kadimastem<br> Ltd.** | **NLS<br> Pharmaceutics Ltd. And Subsidiaries** | **Transaction<br> Accounting<br> Adjustments** | **Notes** | **Pro Forma<br> Combined** |
| **OPERATIONS:** | | | | | |
| Operating Expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Research and development expenses | $575875 | $142083 | $— |  | $717958 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 685659 | 1637132 | 71671 | (G) | 2394462 |
| &nbsp;&nbsp;&nbsp;Merger transaction costs | 100889 | 420289 |  |  | 521178 |
| Total operating expenses | 1362423 | 2199504 | 71671 |  | 3633598 |
| Operating loss | (1362423) | (2199504) | (71671) |  | (3633598) |
| Other income (expense): |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Financing expenses related to the conversion component and options of convertible loans and shareholder loans | (9923013) |  | 9923013 | (A) |  |
| &nbsp;&nbsp;&nbsp;Other income (expense), net | 54475 | (20782) |  |  | 33693 |
| &nbsp;&nbsp;&nbsp;Interest expense | (24458) | (385) |  |  | (24843) |
| Total other income (expense) | (9892996) | (21167) | 9923013 |  | 8850 |
| Net loss | (11255419) | (2220671) | 9851342 |  | (3624748) |
| &nbsp;&nbsp;&nbsp;Deemed dividend-make whole shares |  | (1231900) |  |  | (1231900) |
| &nbsp;&nbsp;&nbsp;Deemed dividend-warrants |  | (613939) |  |  | (613939) |
| &nbsp;&nbsp;&nbsp;Accrued dividends on preferred shares |  | (126367) |  |  | (126367) |
| &nbsp;&nbsp;&nbsp;Tax benefit | 50961 |  |  |  | 50961 |
| **Net loss attributable to common shareholders** | $**(11204458)** | $**(4192877)** | $**9851342** |  | $**(5545993)** |
| **Basic and diluted loss per common share** | $**(2.81)** | $**(1.05)** | $**—** |  | $**(0.10)** |
| **Weighted average common shares used in computing basic and diluted net loss per common share** | **4320900** | **4004867** | **—** |  | **56538856** |

---

**Kadimastem Ltd. & NLS Pharmaceutics Ltd.**

**UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Twelve Months Ended December 31, 2024** | **For the Twelve Months Ended December 31, 2024** | **For the Twelve Months Ended December 31, 2024** | **For the Twelve Months Ended December 31, 2024** | **For the Twelve Months Ended December 31, 2024** |
|  | **Kadimastem<br> Ltd.** | **NLS<br> Pharmaceutics,<br> Ltd. And Subsidiaries** | **Transaction<br> Accounting<br> Adjustments** | **Notes** | **Pro Forma<br> Combined** |
| **OPERATIONS:** | | | |  | |
| Operating expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Research and development expenses | $992425 | $422051 | $— |  | $1414599 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 793183 | 3214224 | 117919 | (F) | 4125326 |
| &nbsp;&nbsp;&nbsp;Merger transaction costs | 268720 | 743838 |  |  | 1012558 |
| Total operating expenses | 2054328 | 4380113 | 117919 |  | 6552360 |
| Operating loss | (2054328) | (4380113) | (117919) |  | (6552360) |
| Other income (expense): |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other income due to the termination of Eurofama License Agreement |  | 2499969 |  |  | 2499969 |
| &nbsp;&nbsp;&nbsp;Financing expenses related to the conversion component and options of convertible loans and shareholder loans | (5043768) |  | 5043768 | (A) |  |
| &nbsp;&nbsp;&nbsp;Other income (expense),net | 6000 | 49351 |  |  | 55351 |
| &nbsp;&nbsp;&nbsp;Interest expense | (93368) | (45054) |  |  | (138422) |
| &nbsp;&nbsp;&nbsp;Interest expense on related party loans |  | (104963) | 104963 | (E) |  |
| Total other income (expense) | (5131136) | 2399303 | 5148731 |  | (2416898) |
| Net loss | (7185464) | (1980810) | 5030812 |  | (4135462) |
| &nbsp;&nbsp;&nbsp;Deemed dividend |  | (2076180) |  |  | (2076180) |
| &nbsp;&nbsp;&nbsp;Tax benefit | 7131 |  |  |  | 7131 |
| **Net loss attributable to common stockholders** | $**(7178333)** | $**(4056990)** | $**5030812** |  | $**(6204511)** |
| **Basic and diluted loss per share** | $**(1.71** **)<sup>(ii)</sup>** | $**(2.63** **)<sup>(i)</sup>** | $**—** |  | $**(0.12)** |
| **Weighted average common shares used in computing basic and diluted net loss per common share** | **4193689** **<sup>(ii)</sup>** | **1543283** **<sup>(i)</sup>** | **—** |  | **51967082** |

---

(i) This gives effect to the reverse stock split of 1-for-40 as
of September 27, 2024.

(ii) Adjusted retroactively due to (A) the rights issue under the
shelf offering by way of rights published by NLS in 2022 in such a way that each shareholder who held 100 Shares would be entitled
to purchase 1 rights unit, with 1 rights unit consisted of 32 Shares, and the total price of each rights unit was USD $10 and the total
number of rights units offered was up to 14,623,392 rights units, and (B) the reverse share split conducted by Kadimastem in March 2024,
at a 10-for-1 ratio.

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

**Kadimastem Ltd. & NLS Pharmaceutics Ltd.<br> Notes to accompanying Unaudited Pro Forma Condensed Combined Financial Statements**

**1.** **Description of the Proposed Transaction and Basis of Presentation** 

NLS, a biopharmaceutical company, and Kadimastem , a clinical-stage cell therapy company developing and manufacturing "off-the-shelf" allogeneic cell products for the treatment of neurodegenerative diseases and potential cure of diabetes, announced on November 4, 2024 that they have entered into the Merger Agreement to combine the two companies to focus on advancing NLS's promising, first-in class Dual Orexin Agonist platform ("DOXA") and Kadimastem's allogenic cell therapy program with its clinical assets (mainly targeting diabetes and amyotrophic lateral sclerosis (ALS), with Phase 2a studies that are planned to be initiated in the U.S. following the closing of the transaction). AstroRx<sup>®</sup> Phase 2a study cost estimation is about $12 million. The necessary steps for study initiation include completion of AstroRx<sup>®</sup> clinical production by contract development and manufacturing organization and contract signing with medical centers and clinical teams. Following the Closing, NLS intends to divest its other legacy assets (including the mazindol ER but excluding the DOXA platform)(the "Legacy Assets"), and the net proceeds of any such disposition, after deducting certain costs, fees, and expenses as set forth in a contingent value agreement (the "CVR Agreement"), will be distributed to NLS's shareholders and warrant holders, subject to the terms of the Merger Agreement and the CVR Agreement. At the Closing, pursuant to the terms of the Merger Agreement, (i) Merger Sub will merge with and into Kadimastem, with Kadimastem as the surviving company, and (ii) NLS will issue NLS Common Shares to Kadimastem's shareholders based on an initial target fully diluted share split, post-Merger, of 85% to Kadimastem shareholders and 15% to NLS shareholders, in exchange for 100% of issued and outstanding Kadimastem Ordinary Shares. The initial targeted fully diluted share split of 85%/15% was subject to adjustment pursuant to the terms of the Merger Agreement, including estimated cash at the Measurement Date of NLS and Kadimastem and estimated indebtedness of NLS at the Measurement Date. Based on various factors, including gross cash proceeds from NLS's financing transactions from October 2024 through June 2025 (approximately $6.7 million mostly from investors introduced to NLS by Kadimastem, which satisfy the Investment Proceeds Adjustment per the Merger Agreement) (for more information please see "NLS's Management's Discussion and Analysis of Financial Condition and Results of Operations — Financing Activities" contained in NLS's Report on Form 6-K furnished to the SEC on October 6, 2025 and in NLS's Annual Report on Form 20-F for the year ended December 31, 2024 filed with the SEC on May 16, 2025), the parties have agreed that the fully diluted share split at the Closing will be approximately 84% to Kadimastem shareholders and 16% to NLS shareholders. The Merger Agreement and the consummation of the transactions contemplated thereby have been approved by the boards of directors of NLS and Kadimastem, and Kadimastem's shareholders. The board of directors of NLS has resolved, subject to customary exceptions, to recommend that the shareholders of NLS approve the Merger Agreement and the transactions contemplated therein. The parties expect the Merger to close in October 2025, pending customary closing conditions, including Nasdaq Stock Market LLC approval.

The most recent financial information available for NLS for the six months ended June 30, 2025, and twelve months December 31, 2024, have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification and Accounting Standards Updates of the Financial Accounting Standards Board.

The most recent financial information available for Kadimastem Ltd. for the six months ended June 30, 2025, and twelve months December 31, 2024, have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board ("IASB").

The unaudited pro forma condensed combined financial statements have been prepared in accordance with the regulations of the SEC and with IFRS as issued by the IASB. The unaudited pro forma condensed combined financial statements combine the historical balance sheets and statements of operations of NLS Pharmaceutics Ltd. and Kadimastem Ltd. to illustrate how the Merger might have affected the historical financial statements if the transaction had been completed on June 30, 2025, for purposes of the balance sheet, and on January 1, 2024, for purposes of the statements of operations for the twelve months ended December 31, 2024, and the six months ended June 30, 2025. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X under the Securities Act of 1933, as amended.

Upon completion of the Merger, management will conduct a comprehensive review of both entities' accounting policies. Based on NLS's initial analysis, currently, adjustments for the acceleration of the stock compensation expense were identified in Note (G) and reflected in the unaudited pro forma condensed combined financial information.

For accounting purposes, the Merger is expected to be treated as a reverse triangular merger pursuant to IFRS 3, Business Combinations, such that NLS has been identified as the legal acquirer as it intends to issue securities to Kadimastem whose equity interests are acquired (legal acquiree) and Kadimastem will be the acquirer for accounting purposes. The Merger is anticipated to be accounted for using the acquisition method (as a reverse triangular merger), with goodwill and other identifiable intangible assets recorded in accordance with IFRS, as applicable to be determined at the time of Merger.

Under this method of accounting, NLS is anticipated to be treated as the "acquired" company for financial reporting purposes, and Kadimastem is determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) Kadimastem security holders are expected to own approximately 84% of the voting interests of the combined company immediately following the Closing; (ii) directors appointed by Kadimastem will constitute the majority of the board of directors of the combined company; and (iii) employees of Kadimastem will constitute the majority of the management of the combined company. Kadimastem is anticipated to be the accounting acquirer because it is anticipated to control the board of directors, management of the combined company, and the preexisting shareholders of Kadimastem are currently anticipated to have the majority voting rights of the combined company.

**2.** **Pro Forma Adjustments** 

NLS is providing the unaudited pro forma condensed combined information for illustrative purposes only and such pro forma information does not represent the consolidated results or financial position of NLS had its acquisition of Kadimastem been completed as of the dates indicated. The companies may have performed differently had they been combined during the periods presented. Specifically, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies, revenue enhancements or restructuring costs that the combined company may achieve or incur as a result of the acquisition. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies been combined during the periods presented. Further, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

The pro forma adjustments in the unaudited pro forma condensed combined balance sheet as of June 30, 2025, and statement of operations for the six months ended June 30, 2025 and twelve months ended December 31, 2024, are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Adjustment for gross cash proceeds of approximately $1,952,409
 related to Kadimastem convertible loans converted on October 9, 2025 and 1,088,842 warrants also to be exercised at the time of
 Closing. The loan agreements entered on October 16, 2023, from several shareholders include warrants that will be granted
 to the lenders upon conversion of the loan into shares. The non-marketable warrants will be issued at a rate equal to 125% of
 the total loan conversion shares outstanding at the effective time of conversion. The exercise price of the warrants will be equal
 to a rate of 110% of the conversion share price, and the exercise period will be 42 months from the date of their issuance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Adjustment for $1,081,257 related to conversion of loans from
related parties as noted above at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Adjustment for $1,115,065 related to conversion of loans from
related parties as noted above at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Adjustment for $11,662,604 related to conversion of convertible
loan and warrants as noted above at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Adjustment to remove $9,923,013 of non-cash revaluation expense of convertible loans from
 shareholders and related parties related to loans converted as noted above at the Closing as if the Merger took place on January 1,
 2025, for the six months ended June 30, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Adjustment to remove $5,043,728 of non-cash revaluation expense of convertible loans from
 shareholders and related parties related to loans converted as noted above at the Closing as if the Merger took place January 1,
 2024, for the twelve months ended December 31, 2024;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) Adjustment to record additional non-recurring NLS transaction costs of approximately $350,000 for
 legal, audit and other professional service provider expenses and director and officer tail insurance that were not included as part
 of the transaction costs recorded as of June 30, 2025, for $420,289. For the transaction costs incurred and recorded subsequent to
 June 30, 2025, $200,000 has been paid in cash and $150,000 has been accrued for purposes of payment subsequent to the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) Adjustment to record additional non-recurring Kadimastem transaction
costs of approximately $150,000 for legal, audit and other professional service provider expenses that were not incurred or accrued as
of June 30, 2025, of $100,889. For the transaction costs incurred and recorded subsequent to June 30, 2025, $50,000 has been paid in
cash and $100,000 has been accrued for purposes of payment subsequent to the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) Adjustment for $28,452 to record conversion of 754,545 of the
NLS's preferred shares, par value CHF 0.03 per share ("NLS Preferred Shares"), pursuant to the securities purchase
agreement NLS entered into with three accredited investors on March 27, 2025 into 754,545 NLS Common Shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) Adjustment of $3,771 to record 100,000 NLS Common Shares pursuant
to a warrant exchange agreement entered on August 5, 2025, with Alpha Capital Anstalt ("Alpha"). The agreement exchanged
a certain common share purchase warrant dated October 10, 2024 to purchase 207,913 of NLS Common Shares previously issued to the Alpha
under a securities purchase agreement dated October 9, 2024, between NLS and certain accredited investors, for 100,000 NLS Common Shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) Adjustment to remove $104,963 of interest expenses related to
loans converted at the Closing as if Merger took place on January 1, 2024, for the twelve months ended December 31, 2024;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) Adjustment for the twelve months ended December 31, 2024, of
$117,919 to accelerate share-based compensation expense for NLS options based on IFRS accounting requirements at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G) Adjustment for the six months ended June 30. 2025 of $71,671
to accelerate share-based compensation expense for NLS options based on IFRS accounting requirements at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H) Adjustment to record elimination of $1,324,178 of share premium
and $64,847,190 common stock of Kadimastem at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I) Elimination of NLS accumulated deficit of $74,455,306 and accumulated
other comprehensive loss of $108,853 at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J) Adjustment of $1,901,330 to record issuance of 50,423,799 NLS Common Shares to Kadimastem at CHF 0.03 par value (USD $0.0377) upon the Closing to currently represent 84% currently estimated ownership in
NLS;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(K) To reflect the preliminary allocation in the unaudited pro forma
condensed combined financial statements, management has estimated the purchase price allocation based on currently available information.
The carrying value of NLS's net assets is assumed to approximate fair value, and the excess of the purchase consideration over
the estimated fair value of those net assets has been preliminarily allocated to intangible assets—specifically, in-process research
and development ("IPR&D")—and goodwill. This allocation is consistent with the guidance in IFRS 3, Business Combinations,
which requires that identifiable intangible assets and goodwill be recognized at their respective fair values as of the acquisition date.
The allocation is subject to change upon completion of the Merger and finalization of the purchase price allocation analysis; however,
this allocation may be adjusted upon the Closing based on the final purchase price analysis to be conducted upon the Closing.

---

| | |
|:---|:---|
|  | **Amount** |
| Purchase price consideration<sup>(1)(2)</sup> | $18640774 |
| &nbsp;&nbsp;&nbsp;Total consideration | $18640774 |
| Assets acquired: |  |
| &nbsp;&nbsp;&nbsp;Cash | $2872376 |
| &nbsp;&nbsp;&nbsp;Prepayments and other current assets | 963511 |
| &nbsp;&nbsp;&nbsp;Deferred offering costs | 296154 |
| &nbsp;&nbsp;&nbsp;Property and equipment and other assets | 5586 |
| &nbsp;&nbsp;&nbsp;Intangible assets-IPR&D & Goodwill<sup>(3)</sup> | 16404422 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets acquired | 20542422 |
| Liabilities assumed: |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities and other | $1605121 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities assumed | 1605121 |
| &nbsp;&nbsp;&nbsp;Estimated fair value of net assets acquired | $18936928 |

---

 

*(1)* *See Note 5 below.* 

*(2)* *The preliminary purchase price of approximately $18.6 million has been allocated primarily to intangible assets — primarily intangibles assets IPR&D and goodwill. This estimate is based on management's assessment of the currently available information, as a formal third-party valuation has not yet been completed. These indefinite-lived intangible assets will not be amortized but will be tested for impairment at least annually, or more frequently if indicators of impairment arise.* 

*(3)* *These intangible assets are not expected to be deductible for tax purposes. Given the preliminary nature of the purchase price allocation, the final allocation at closing may be adjusted. Any remaining consideration not assigned to identifiable net assets — including IPR&D — will be recognized as goodwill in accordance with IFRS 3, Business Combinations (paragraphs 32 – 34). For purposes of this pro forma presentation, NLS has aggregated indefinite-lived intangible assets, and goodwill as distinguishing between them does not impact the current presentation.* 

**3.** **Earnings Per Share and Common Share Reconciliation** 

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of the outstanding NLS Common Shares and NLS Common Shares underlying NLS Preferred Shares and Preferred Participation Certificates pursuant to which Kadimastem agreed to convert its share capital in exchange for the right to receive a number of validly issued, fully paid and nonassessable NLS Common Shares, equal to the Exchange Ratio, per each such Kadimastem Ordinary Share, assuming the Merger and related transactions occurred on January 1, 2024.

**An analysis of the number of outstanding NLS Common Shares post-Merger is as follows assuming an Exchange Ratio of 6.9117 shares of NLS for 1 share of Kadimastem Ordinary Shares:**

---

| | |
|:---|:---|
| NLS Common Shares June 30, 2025, weighted average shares outstanding | 4004867 |
| **NLS Common Shares post-Merger:** |  |
| Estimated outstanding NLS Common Shares and NLS Common Shares underlying outstanding NLS Preferred Shares\* | 6115056 |
| NLS Common Shares issued to Kadimastem shareholders including convertible loans, restricted share units ("RSUs") and options | 50423799 |
| Total NLS Common Shares and NLS Common Shares underlying outstanding Preferred Shares and Preferred Participation Certificates outstanding at Closing | 56538856 |
| NLS Common Shares underlying warrants and options | 3205330 |
| Total NLS Common Shares outstanding as of Closing – Diluted | 59744186 |

---

\* Represents NLS's outstanding shares as of October 3, 2025.

**4.** **Reverse Stock Split** 

NLS filed a notice of a reverse split with the commercial registry of the Canton of Zurich, Switzerland, on September 18, 2024. The reverse split became effective in Switzerland on September 18, 2024. The reverse stock split was at a ratio of 1-for-40. In addition, on September 29, 2025, the NLS's shareholders approved a further reverse stock split at a ratio of 1-for-10, or the 2025 RSS. The accompanying unaudited pro forma condensed combined financial information does not give effect to the 2025 RSS, as certain procedural and regulatory steps required under Swiss corporate law remain outstanding before the split can be effectuated and become effective for accounting and reporting purposes.

**5.** **Estimated Purchase Price Consideration** 

On November 4, 2024, NLS, Kadimastem and Merger Sub entered into the Merger Agreement, pursuant to which, Merger Sub will merge with and into Kadimastem, with Kadimastem surviving as a wholly-owned subsidiary of NLS.

Pursuant to the Merger Agreement, the Kadimastem shareholders agreed to convert their share capital in exchange for the right to receive a number of validly issued, fully paid and nonassessable NLS Common Shares, equal to the Exchange Ratio, per each such Kadimastem Ordinary Share.

The following is a summary of the components of the estimated consideration in equity if the acquisition of Kadimastem had occurred on October 3, 2025:

---

| | |
|:---|:---|
| Estimated outstanding NLS Common Shares and NLS Common Shares underlying outstanding NLS Preferred Shares, options and warrants\* | 9320386 |
| Estimated Kadimastem Shares at time of the Merger (assuming exercise of all Common Warrants into NLS Common Shares)\* | 7295376 |
| Elimination of Kadimastem Ordinary Shares | (7295376) |
| Issuance of NLS Common Shares to Kadimastem shareholders including convertible loans, RSUs and options | 50423799 |
| Total NLS Common Shares and NLS Common Shares underlying outstanding Preferred Shares and Preferred Participation Certificates outstanding at Closing | 56538856 |
| Exchange Ratio: | 6.9117 |

---

\* Represents NLS's outstanding shares as of October 3, 2025.

The Merger will be considered an acquisition of a business and will be accounted for under IFRS 3 which will require the measurement of assets acquired and liabilities to be determined at the time of the Closing. The acquisition-date fair value of the consideration transferred will be calculated based on the equity interests held by NLS's preexisting shareholders and retained post-combination. The estimated fair value of the purchase price consideration will be determined at the time of the Closing based on the fair market value of NLS Common Shares and will be allocated based on the assets and liabilities of NLS that will be reflected at carrying value and the net assets of NLS, including goodwill and other identifiable intangible assets of NLS will be recorded based upon their fair values at time of Closing.

The estimated fair value of the purchase price consideration will be based upon the number of NLS Common Shares expected to be outstanding at the time of the Merger along with the market price of the NLS Common Share on the date of the Closing. As of October 3, 2025, NLS Common Shares and NLS Common Shares underlying outstanding NLS Preferred Shares, options and warrants are 9,320,387 NLS Common Shares and based upon a $2.00 closing price of NLS Common Shares the preliminary purchase price consideration is approximately $18,640,774. The market price of NLS Common Shares has been deemed to be more reliably measurable than the value of the Kadimastem's equity interests because, prior to the Closing, Kadimastem is traded on the Tel Aviv Stock Exchange which is not considered as reliable as the Nasdaq Capital Market, where NLS securities are traded.

The Merger Agreement provides that, upon the terms and subject to the conditions thereof, following the Closing, NLS shall work diligently to dispose of the Legacy Assets. Therefore, these assets are not intended for use in the combined company's future operations. It is expected that the proceeds from any sale or disposition of all or any part of the Legacy Assets will be distributed to the shareholders and warrant holders of NLS as of immediately prior to the Effective Time pursuant to the terms and conditions of the CVR Agreement. If a sale is not achieved, the combined company does not intend to further develop these assets internally. Due to the uncertainty surrounding the realization of any sale, the likelihood of contingent proceeds is considered remote and of minimal value. Accordingly, these Legacy Assets and any related contingent distribution have not been recognized in the preliminary valuation.