NOTE 1:- GENERAL

The Company’s R&D activities are focused primarily on two areas: (i) the development of therapeutic candidates based on its NanoAb (VHH antibody fragment) platform, including programs conducted in collaboration with the Max Planck Society (“MPG”), including the Max Planck Institute for Multidisciplinary Sciences, and the University Medical Center Göttingen (“UMG”), both located in Germany; and (ii) the advancement of PC111, a fully human monoclonal antibody targeting soluble Fas Ligand for the treatment of severe dermatological conditions, pursuant to the Company’s option agreement relating to PinCell S.r.l. The Company advances its therapeutic programs through the pre-clinical and clinical development stages required for regulatory approval, subject to available funding and applicable contractual arrangements.

The Company’s CDMO business provides development and manufacturing services to biotechnology and pharmaceutical companies, supporting programs from early-stage development through clinical-stage manufacturing. Following the acquisition of Recipharm Israel Ltd. in February 2026, the CDMO business operates through facilities in Jerusalem and Yavne, Israel. The Jerusalem facility is focused primarily on early-stage development, analytics, biologics manufacturing and aseptic processing, while the Yavne facility provides early chemistry development and cGMP manufacturing of active pharmaceutical ingredients (“APIs”) for clinical trials supplies.

The Company was incorporated on July 21, 2003, in Israel and commenced its activities on March 31, 2005. In 2007, the Company completed an initial public offering of its ordinary shares on the Tel Aviv Stock Exchange (“TASE”) and voluntarily delisted from the TASE in January 2018. In May 2015, the Company completed an initial public offering of American Depositary Shares (“ADSs”) on the Nasdaq Capital Market. The Company’s principal executive offices are located in Jerusalem, Israel.

On April 6, 2026, the Company announced the completion of a strategic corporate reorganization establishing a dedicated CDMO platform alongside a streamlined R&D organization, representing a structural transformation of the Company’s operating model, designed to enhance capital efficiency, improve operational focus and position each business to independently create and capture value. As part of the corporate reorganization designed to consolidate the Company’s CDMO activities, the Company transferred all CDMO-related operations, including the related employees, operating activities, equipment, contracts, and other operational assets and liabilities associated with the CDMO business, to Scinai Biopharma Services Ltd. establishing it as the Company’s dedicated CDMO subsidiary, operating as a fully integrated, privately held CDMO platform, wholly owned by the Company.

Following this development, the Company and PinCell are discussing a further amendment to the option agreement to extend the option period in light of the revised anticipated grant and development timeline. The proposed amendment is expected to address the duration of the extension and certain related funding and other commercial terms. The parties have not yet finalized such amendment, and there can be no assurance as to whether or when an amendment will be entered into or as to its final terms.

During 2025, the Company completed multiple drawdowns under the March 2025 SEPA, receiving aggregate gross proceeds of approximately $5,800 through the issuance of approximately 220 thousands ADSs.

Under the September 2025 SEPA, ADSs sold pursuant to an Advance are generally purchased by YA at a price equal to 97% of the lowest daily volume-weighted average price of the ADSs during the applicable three-trading-day pricing period, subject to the Company’s right to specify a minimum acceptable price.

The valuation of certain acquired assets and assumed liabilities remains subject to further review and refinement. Accordingly, the purchase price allocation is preliminary and may be adjusted during the measurement period, not to exceed one year from the acquisition date, as additional information becomes available regarding facts and circumstances that existed as of the acquisition date. Any such adjustments may result in changes to the provisional amounts recognized, including property and equipment, working capital balances, lease-related assets and liabilities, and the resulting gain from the bargain purchase.

The preliminary allocation of the purchase price is summarized below (in thousands of U.S. dollars):

As the consideration transferred was nominal (€1), substantially all of the fair value of the net identifiable assets acquired resulted in a gain from bargain purchase of approximately $6.4 million.

From the acquisition date through June 30, 2026, the acquired business contributed revenues of approximately $654 and a net loss of approximately $2,058 to the Company’s condensed consolidated statements of operations.

The bargain purchase resulted primarily from the seller’s strategic decision to exit the Yavne operation as part of a broader rationalization of its global manufacturing footprint in a manner that allowed it to prioritize an orderly and timely exit from the operation, together with the preservation of potential future commercial opportunities via an ongoing cross referral business relationship with the Company, rather than maximizing immediate sale proceeds, and accepting nominal consideration for the business despite the positive fair value of the identifiable net assets transferred.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

NOTE 3: - COMMITMENTS

Since 2006, the Company has received approximately $6,400 in grants from the Israeli Innovation Authority (“IIA”), of which approximately $4,600 related to the research and development of M-001 and approximately $1,800 related to the development and expansion of the Company’s CDMO business. During the six months ended June 30, 2026, the Company received additional grant proceeds of approximately $100 in connection with its CDMO activities. The grants received in connection with the Company’s CDMO activities are not subject to repayment or royalty obligations.

In respect of the grants received for the development of M-001, the Company undertook to pay royalties generally ranging from 3% to 5% of revenues derived from products, services or know-how developed, in whole or in part, using IIA-funded technology, until repayment of the applicable grants plus annual interest in accordance with the IIA rules. As of June 30, 2026, the aggregate royalty repayment ceiling in respect of the M-001 grants, including applicable accrued interest, was approximately $5,309. As of June 30, 2026, the Company had not paid any royalties to the IIA.

Following the results of the Phase 3 clinical trial of M-001, the Company discontinued development of M-001 and does not expect M-001 or the related funded technology to generate revenues. Accordingly, the Company does not currently expect to make royalty payments in respect of the M-001 grants.

The Company remains subject to certain obligations under applicable IIA rules with respect to IIA-funded know-how, including restrictions on the transfer and license of such know-how and, in certain circumstances, manufacturing activities outside Israel. The Company currently has no plans to transfer or license the M-001-related IIA-funded know-how and does not expect these restrictions to have a material effect on its ongoing operations.

NOTE 4: - LOAN FROM OTHERS

On August 21, 2024, the Company completed a restructuring transaction with the European Investment Bank (the “EIB”), which included the execution of a restructuring agreement and an amendment to the finance contract between the Company and the EIB (collectively, the “EIB Restructuring Transaction”).

Pursuant to the EIB Restructuring Transaction, approximately EUR 26.6 million (approximately $29,000), representing substantially all amounts then outstanding under the finance contract, including accrued interest, was converted into 1,000 preferred shares of the Company, with no par value. The Company measured the fair value of the preferred shares using an option pricing model (“OPM”) based on, among other assumptions, an expected term of three years, a risk-free interest rate of 3.8% and expected volatility of 110%.

Following completion of the EIB Restructuring Transaction, an amount of EUR 250 thousand remained outstanding under the finance contract. As of June 30, 2026, the carrying amount of such outstanding balance was approximately $285. The remaining amount matures on December 31, 2031 and does not bear interest.

As part of the EIB Restructuring Transaction, the Company’s previous obligations to pay the EIB (i) royalties based on commercial sales exceeding EUR 5 million and (ii) an amount equal to 10% of the gross proceeds from certain capital raises were terminated.

During the six months ended June 30, 2026, as part of an internal corporate reorganization, the Company transferred its CDMO-related operations, including employees, infrastructure, manufacturing facilities, customer contracts and associated business activities, to its wholly owned subsidiary, Scinai Biopharma Services Ltd., in order to consolidate the Group’s CDMO activities under a single operating subsidiary. In connection with the transfer, the Company engaged with the EIB regarding the consent required under the existing finance contract and the related security arrangements. The EIB has indicated its willingness to consent to the transfer, subject to completion of guarantee and lien documentation from Scinai Biopharma Services Ltd. and related steps.

NOTE 5: - SHAREHOLDERS’ EQUITY

During 2025, the Company completed multiple drawdowns under the March 2025 SEPA, receiving aggregate gross proceeds of approximately $5,800 through the issuance of approximately 220 thousands ADSs.

The March 2025 SEPA was subsequently automatically terminated upon the effectiveness of the registration statement relating to the September 2025 SEPA described below, other than certain provisions that survived termination.

Under the September 2025 SEPA, ADSs sold pursuant to an Advance are generally purchased by YA at a price equal to 97% of the lowest daily volume-weighted average price of the ADSs during the applicable three-trading-day pricing period, subject to the Company’s right to specify a minimum acceptable price.

As consideration for YA’s commitment, the Company agreed to pay a commitment fee of $108, of which 50% was satisfied upon execution of the agreement through the issuance of 3,546 ADSs to YA and the remaining 50% was payable in cash on the earlier of the first issuance of ADSs pursuant to an Advance and 90 calendar days following the effectiveness of the related registration statement.

Concurrently, the Company entered into a warrant inducement agreement with an existing institutional investor pursuant to which the investor agreed to exercise existing warrants to purchase 22,931 ADSs at an exercise price of $4.8 per ADS. In consideration for such exercise, the Company issued the investor new unregistered warrants to purchase up to 45,862 ADSs, exercisable immediately at an exercise price of $5.5 per ADS and expiring five years from issuance.

The aggregate gross proceeds from the private placement and the warrant inducement transaction were approximately $2.61 million, before deducting placement agent fees and other offering expenses. The financing closed on or about April 27, 2026, subject to customary closing conditions.

NOTE 6: - SHARE-BASED COMPENSATION

Options granted under the Company’s 2005 Israeli Share Option Plan (“Plan”) were exercisable in accordance with the terms of the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over a period of three or four years.

In March 2018, the Company’s Board of Directors approved the adoption of the Company’s 2018 Israeli Share Option Plan (“2018 Plan”) for the grant of options and restricted shares (“RSU”) to employees, directors and service providers. The options are exercisable within 10 years from the date of grant, against payment of the exercise price, in accordance with the terms of the 2018 Plan. The options generally vest over a period of three or four years.

During the six months ended June 30, 2025, the Company granted 900 RSUs to employees, These RSU’s vest over three years and the fair value of said grant was $3.

As of June 30, 2026, there are $ 232 total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to four years.

The fair value of the granted RSUs was determined based on the stock market price of the Company’s ADS on the day of grant.

NOTE 7 - BASIC AND DILUTED NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, including pre-funded warrants and fully vested RSUs.

The Company applies the two-class method in calculating net income (loss) per ordinary shares. In order to determine the net income (loss) attributable to ordinary shares, the Company first considered the total income allocable to preferred shares. This is calculated using the total net income (loss) less undistributed income allocable to preferred shares due to their redemption feature.

Calculating diluted EPS incorporates the potential impact of dilution that could occur if outstanding dilutive securities were converted into Ordinary shares or exercised. These securities can include stock options, restricted stock units (RSUs), preferred shares and warrants.

For the six months ended June 30, 2025, the following items have been excluded from the diluted weighted average number of shares outstanding because they are anti-dilutive: 97,228,400 share options, 381,104,276 restricted share units 1,456,000,000 Preferred shares and 2,231,316, 096 warrants.

NOTE 8 - REVENUES

NOTE 9 - SEGMENTS

Operating Segments

Management assessed the Company’s operating and reportable segments in accordance with ASC 280, Segment Reporting. The Company’s CEO is the chief operating decision maker (“CODM”).

Following the acquisition of Scinai Biopharma Services Ltd, The company identified one reportable segment, the CDMO operation.

The CDMO is being operated from two facilities, located in Jerusalem and Yavne, Israel, which have complementary technical and operational capabilities, the company manages and assess performance of both facilities on an integrated basis and utilize common management and operational resources. The Company also continues to conduct proprietary research and development activities which are presented as others.

NOTE 10 - SUBSEQUENT EVENTS