NewcelX (NCEL) Risk Analysis

NLS will have limited protection if any representation or warranty made by Kadimastem in the Merger Agreement proves to be inaccurate or incorrect, and such representations and warranties will not survive the closing. Accordingly, to the extent such representations or warranties are incorrect, NLS would have limited or no indemnification claims with respect thereto, may not recover any damages it may have suffered, and may not have sufficient cash on hand or other resources to seek to pursue an alternative strategic transaction or avoid the dissolution and liquidation of NLS in the event that the Merger does not close.

The interests of NLS's and Kadimastem's directors and executive officers in the Merger may increase the risk of litigation intended to enjoin or prevent the Merger and the risk of other related dissident shareholder activity. In the past, and in particular following the announcement of a significant transaction, periods of volatility in the overall market or declines in the market price of a company's securities, shareholder litigation and dissident shareholder proposals have often been instituted against companies alleging conflicts of interest in business dealings with affiliated or related persons and entities. For example, following the Merger, members of the combined company Board will be entitled to new compensation terms, and certain officers of Kadimastem holding shares in Kadimastem will exchange such shares for shares of NLS in connection with the Merger. The relationships described above may precipitate such activities by dissident shareholders and, if instituted against NLS or Kadimastem or their respective directors or executive officers, such activities could result in substantial costs, a material delay or prevention of the Merger and a diversion of management's attention, even if the shareholder action is without merit or unsuccessful.

NLS's shareholders have the right to vote in the election of the NLS Board members and on certain other matters affecting NLS, as specified in NLS Bylaws, and Kadimastem's shareholders have the right to vote in the election of the Kadimastem Board and on certain other matters affecting Kadimastem, as specified in Kadimastem's articles of association. As a result of the Merger, the ownership position of existing shareholders of NLS will decrease and Kadimastem's shareholders will have an ownership position in NLS that is smaller than their current stake in Kadimastem. The parties currently estimate the fully diluted share split at the Closing will be 80% to Kadimastem shareholders and 20% to NLS shareholders. Consequently, NLS's and Kadimastem shareholders will have less influence over the management and policies of NLS after the Effective Time (as such term is defined below in "Item 4. Information on the Company - A. History and Development of the Company - Agreement and Plan of Merger with Kadimastem") than they currently exercise over the management and policies of NLS and Kadimastem, respectively. NLS's and Kadimastem's directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of NLS's and Kadimastem's shareholders generally. Mr. Alexander Zwyer will continue to be a director of the combined company after the Effective Time of the Merger for a period of 12 months. Mr. Eric Konofal will continue to be a part-time officer of the combined company after the Effective Time of the Merger. In addition, as of the Closing, NLS shall, at Kadimastem's expense (up to a maximum of $200,000), obtain a "run-off" prepaid directors' and officers' liability insurance policy for the benefit of NLS's current and former officers and directors, effective as of the Closing, with a reporting period of six (6) years after the Closing, covering events, acts and omissions occurring before the Closing Date, and with coverage and amounts, and terms and conditions that are acceptable to NLS. The premium for such policy (up to a maximum of $200,000) shall be paid by Kadimastem on or prior to the Closing, and NLS shall take all necessary actions, and not fail to take any action, to prevent the cancellation of such policy during its term. Additionally, following the Merger, several agreements related to compensation for NLS' officers and directors will go into effecting, including: - Mr. Twito's annual salary of USD 370,188 (including social benefits) which will increase to USD 413,743 upon the combined company completing a capital raise greater than $10 million following the Merger and a bonus payment, subject to the discretion of the Board; and - Each director on the board of NLS (1) shall receive an annual amount of $25,000, payable quarterly, and a one-time option grant equal to 0.2% of the outstanding common shares, with the initial vesting over three (3) years, with an exercised price equal to the market price at the Closing; and (2) will enter into indemnification agreements between NLS and members of the board of directors. Additionally, Prof. Michel Revel, MD, Director and Chief Scientific Officer of Kadimastem and the beneficial owner of 1,371,052 shares of Kadimastem, and Ronen Twito, Executive Chairman and Chief Executive Officer, or CEO, of Kadimastem, and beneficial owner of 367,332 of Kadimastem, will benefit directly from the exchange of their shares of Kadimastem in exchange for shares of NLS resulting from the Merger. This may create potential conflicts of interest or the appearance of such conflicts, which may lead to increased dissident shareholder activity, including litigation, which could result in significant costs for NLS and Kadimastem and could materially delay or prevent the completion of the Merger.

NLS or Kadimastem may determine to waive, in whole or in part, one or more of the conditions to its obligation to consummate the Merger. Any determination whether to waive any condition to the Merger and whether to re-solicit shareholder approval or amend the related proxy statement/prospectus or Registration Statement on Form F-4 as a result of a waiver will be made by NLS or Kadimastem, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time.

Under the Merger Agreement, each party's obligation to complete the Merger is subject to the satisfaction or waiver of various conditions, including common shares shall remain listed on the Nasdaq and shall not be subject to a delisting notice from Nasdaq. The notification form for the listing of common shares to be issued in connection with the Merger shall have been accepted and approved (subject to official notice of issuance), and the Nasdaq listing application for initial listing of NLS following the Merger and of common shares being issued pursuant to the Merger Agreement shall have been approved. NLS is currently seeking to have its securities approved for listing on Nasdaq in connection with the Merger. NLS cannot assure you that it will be able to meet those initial listing requirements at the time of the Closing. Even if NLS's securities are listed on Nasdaq, it cannot assure you that its securities will continue to be listed on Nasdaq. In addition, following the Merger, to maintain its listing on Nasdaq, NLS will be required to comply with certain continued listing standards of Nasdaq including those regarding minimum shareholders' equity, minimum share price, minimum market value of publicly held shares, minimum number of shareholders and various additional requirements. Even if NLS initially meets the listing requirements and other applicable rules of Nasdaq, NLS may not be able to continue to satisfy these requirements and applicable rules. If NLS is unable to satisfy Nasdaq criteria for maintaining its listing, its securities could be subject to delisting. If Nasdaq does not list NLS's securities, or subsequently delists its securities from trading, NLS could face significant consequences, including: - failure to satisfy a closing condition to the Merger and the inability to therefore complete the Merger;- a limited availability for market quotations for its securities;- reduced liquidity with respect to its securities;- a determination that its Common Shares are "penny stock," which will require brokers trading in its Common Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the Common Shares;- limited amount of news and analyst coverage; and - a decreased ability to issue additional securities or obtain additional financing in the future. Failure to comply with Nasdaq rules, the delisting of NLS's securities from Nasdaq or the inability to complete the Merger could materially adversely affect the business, financial results and share price of NLS.

Kadimastem's ability to become profitable depends upon Kadimastem's ability to generate revenue. To date, Kadimastem have not generated any revenue from Kadimastem's development stage product candidates, AstroRx and/or IsletRx. In order to generate significant revenue, it will need to obtain additional regulatory approvals in jurisdictions within which it already has certain regulatory approvals, and also in jurisdictions in which it currently has no regulatory approvals to market Kadimastem's products. Even if Kadimastem's current products or any future products are approved for marketing and sale, it anticipates incurring significant incremental costs associated with commercializing such products. Kadimastem's ability to become profitable depends upon Kadimastem's ability to generate revenue. To date, Kadimastem has not generated any revenue from Kadimastem's development stage product candidates, AstroRx and/or IsletRx, and do not know when, or if, it will generate any such revenue. Kadimastem does not expect to generate significant revenue unless or until Kadimastem obtains marketing approval of, and commercializes, AstroRx and/or IsletRx. Kadimastem's ability to generate future revenue from product candidate sales depends heavily on its success in many areas, including but not limited to: - obtaining favorable results from and progress the pre-clinical and clinical development of Kadimastem's product candidates, namely AstroRx and/or IsletRx;- developing and obtaining regulatory approval for registration studies protocols for Kadimastem's product candidates, namely AstroRx and/or IsletRx;- subject to successful completion of registration and clinical trials of AstroRx and/or IsletRx, applying for and obtaining marketing approval;- establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products, and at acceptable costs, to support market demand for Kadimastem's product candidates, if marketing approval is received;- identifying, assessing, acquiring and/or developing new product candidates;- accurately identifying demand for Kadimastem's product candidates;- obtaining market acceptance of Kadimastem's product candidates, if approved for marketing, as viable treatment options;- negotiating favorable terms in any collaboration, licensing or other arrangements into which Kadimastem may enter;- establishing and nurturing relationships with the leading physicians in the United States; and - attracting, hiring and retaining qualified personnel.

Each of NLS and Kadimastem have incurred losses since its respective inception and expects to continue to incur losses for the foreseeable future, including, with respect to NLS, following the Merger. NLS's net loss attributable to holders of our common shares for the years ended December 31, 2024 and 2023, respectively was approximately $4.1 million and $12.2 million. As of December 31, 2024 and December 31, 2023 NLS had an accumulated deficit of approximately $74.4 million and $70.4 million, respectively, and total equity of $1.4 million and $(8.8) million. Substantially all of our operating losses resulted from costs incurred in connection with our clinical development program and from general and administrative costs associated with our operations. Kadimastem reported net losses of approximately $7.2  million, $3.3 million and $6.8 million for the years ended December 31,2024, 2023 and 2022, respectively, As of December 31, 2024 and 2023, Kadimastem had a total equity of approximately $(8.0) million and $(1.2) million, respectively, and accumulated deficit of approximately $(76.5) million and $(69.3) million, respectively. NLS expects to incur net losses from continuing operations and net cash used in operating activities, including following the Merger. NLS may need to raise additional working capital to continue its normal and planned operations. NLS will need to generate and sustain significant revenue levels in future periods in order to become profitable, and, even if NLS does, NLS may not be able to maintain or increase its level of profitability. NLS anticipates that its operating expenses will remain substantially consistent in the foreseeable future. This reflects a decrease in operating costs associated with discontinued assets as part of the anticipated merger, offset by increased consultancy efforts, acquisition activities, and expanded marketing and sales initiatives aimed at growing its customer and client base. These expenditures will make it necessary for NLS to continue to raise additional working capital and make it harder for us to achieve and maintain profitability. NLS's efforts to grow NLS's business may be costlier than NLS expects, and NLS may not be able to generate sufficient revenue to offset NLS's increased operating expenses. If NLS is forced to reduce NLS's operating expenses, NLS's growth strategy could be compromised. NLS may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays and other unknown events. Accordingly, substantial doubt exists about NLS's ability to continue as a going concern, including following the Merger, and NLS cannot assure you that NLS will achieve sustainable operating profits as NLS continues to expand NLS's infrastructure, further develop NLS's marketing efforts, and otherwise implement NLS's growth initiatives. The net losses that NLS incurs may fluctuate significantly from period to period. NLS will need to generate significant additional revenue to achieve and sustain profitability. Even if NLS achieves profitability, it cannot be sure that it will remain profitable for any substantial period of time.

Kadimastem is an emerging biopharmaceutical company with a limited operating history. Kadimastem has funded its operations to date primarily through raising capital on the Tel Aviv Stock Exchange ("TASE"), proceeds from the private placement of common shares, credit facilities, loans and convertible notes. Kadimastem expects to continue to incur substantial losses over the next several years during Kadimastem's clinical development phase. To fully execute Kadimastem's business plan, it will need to complete Phase 3 clinical studies and certain development activities, as well as manufacture the required clinical and commercial production batches in the pilot manufacturing plant. Further, Kadimastem's product candidates will require regulatory approval prior to commercialization, and it will need to establish sales, marketing and logistic infrastructures. These activities may span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact us. Management of Kadimastem plans to seek additional equity financing through private and public offerings or strategic partnerships and, in the longer term, by generating revenues from product sales. Kadimastem has incurred losses in each year since its inception. Kadimastem's net loss attributable to holders of ordinary shares of Kadimastem, no par value, or Kadimastem Ordinary Shares, for the years ended December 31, 2024 and 2023 were $7.2 million and $3.3 million, respectively. Substantially all of Kadimastem's operating losses resulted from costs incurred in connection with Kadimastem's development program and from general and administrative costs associated with Kadimastem's operations.

Kadimastem expects its research and development expenses to increase in connection with its planned expanded clinical trials. In addition, if Kadimastem obtains marketing approval for AstroRx and/or IsletRx or any other current or future product candidate, it will likely incur significant sales, marketing and outsourced manufacturing expenses, as well as continued research and development expenses. Furthermore, in the period following this annual report, it expects to incur additional costs associated with operating as a public company, which Kadimastem estimates will be at least several hundred thousand dollars annually. As a result, Kadimastem expects to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, Kadimastem is unable to predict the extent of any future losses or when it will become profitable, if at all. Furthermore, in addition to such operating expenses, Kadimastem expects to incur additional costs associated with operating as a public company subject to the rules and regulations of the SEC, which it estimates will be at least one million dollars annually. As a result, Kadimastem expects to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing drug substances and product candidates, Kadimastem is unable to predict the extent of any future losses or when Kadimastem will become profitable, if at all. Kadimastem expects to continue to incur significant losses until Kadimastem is able to commercialize Kadimastem's product candidates, which it may not be successful in achieving. Kadimastem anticipate that Kadimastem's expenses will increase substantially if and as we: - continue the research and development of Kadimastem's product candidates;- expand the scope of Kadimastem's current clinical studies for its product candidates;- seek regulatory and marketing approvals for Kadimastem's product candidates that successfully complete clinical studies;- establish a sales, marketing, and distribution infrastructure to commercialize Kadimastem's product candidates;- seek to identify, assess, acquire, license, and/or develop other product candidates and subsequent generations of Kadimastem's current product candidates;- seek to maintain, protect, and expand Kadimastem's intellectual property portfolio;- seek to attract and retain skilled personnel; and - create additional infrastructure to support Kadimastem's operations as a public company and Kadimastem's product candidate development and planned future commercialization efforts.

Kadimastem does not believe that its current cash on hand will be sufficient to fund its projected operating requirements. This raises substantial doubt about Kadimastem's ability to continue as a going concern. If Kadimastem cannot continue as a going concern, its investors may lose their entire investment in its common shares. Until Kadimastem can generate significant revenues, if ever, it expects to satisfy its future cash needs through debt or equity financing. Kadimastem cannot be certain that additional funding will be available to it on acceptable terms, if at all. If funds are not available, Kadimastem may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to its products. Even if the Merger is completed, Kadimastem expects that it will need to raise substantial additional funding before it can expect to complete the development of AstroRx and IsletRx or any other product candidate. This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force Kadimastem to delay, limit or terminate its product candidate development efforts or other operations. Even if the Merger is completed, Kadimastem expects it will require substantial additional capital to commercialize its product candidates. In addition, its operating plans may change as a result of many factors that may not currently be known to it, and it may need to seek additional funds sooner than planned. Kadimastem's future funding requirements will depend on many factors, including but not limited to: - its clinical trial results;- the cost, timing and outcomes of seeking marketing approval of AstroRx and/or IsletRx;- the cost of filing and prosecuting patent applications and the cost of defending its patents;- the cost of prosecuting patent infringement actions against third parties;- development of other early-stage development product candidates;- the costs associated with commercializing AstroRx and/or IsletRx if Kadimastem receives marketing approval, including the cost and timing of establishing sales and marketing capabilities to market and sell AstroRx and/or IsletRx;- subject to receipt of marketing approval, revenue received from sales of approved products, if any, in the future;- any product liability or other lawsuits related to Kadimastem's products;- the expenses needed to attract and retain skilled personnel; and - the costs associated with being a public company. Any additional fundraising efforts may divert its management from their day-to-day activities, which may adversely affect Kadimastem's ability to develop and commercialize its product candidates. In addition, Kadimastem cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to it, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of its securities and the issuance of additional securities, whether equity or debt, by it, or the possibility of such issuance, may cause the market price of its common shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and Kadimastem may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact its ability to conduct its business. Kadimastem could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and it may be required to relinquish rights to some of its technologies or product candidates or otherwise agree to terms unfavorable to it, any of which may have a material adverse effect on its business, operating results and prospects. Even if it believes that it has sufficient funds for its current or future operating plans, Kadimastem may seek additional capital if market conditions are favorable or if it has specific strategic considerations. If Kadimastem is unable to obtain funding on a timely basis, it may be required to significantly curtail, delay or discontinue one or more of its research or development programs or the development or commercialization, if any, of any product candidates or be unable to expand its operations or otherwise capitalize on its business opportunities, as desired, which could materially affect its business, financial condition and results of operations.

The report of NLS's independent registered public accounting firm on its consolidated financial statements as of and for the year ended December 31, 2024 includes an explanatory paragraph indicating that there is substantial doubt about its ability to continue as a going concern. If it is unable to raise sufficient capital when needed, its business, financial condition and results of operations will be materially and adversely affected, and it will need to significantly modify its operational plans to continue as a going concern. The inclusion of a going concern explanatory paragraph by NLS's auditors, its lack of cash resources and its potential inability to continue as a going concern may materially adversely affect its share price and its ability to raise new capital or to enter into critical contractual relations with third parties. If it is unable to continue as a going concern, including following the Merger, it might have to liquidate its assets and the values it receives for its assets in liquidation or dissolution could be significantly lower than the values reflected in its financial statement.

NLS expects to incur additional costs associated with continuing to operate as a public company and to require substantial additional funding to continue to pursue its business and continue with its expansion plans. NLS may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase its capital needs and/or cause it to spend its cash resources faster than expected. Accordingly, NLS expects that it will need to obtain substantial additional funding in order to continue its operations. To date, NLS has financed its operations entirely through equity and debt investments by founders and other investors and the incurrence of debt, and it expects to financing its operations through equity and debt investments by investors in the foreseeable future, including following the Merger. Additional funding from those or other sources may not be available when or in the amounts needed, on acceptable terms, or at all. If NLS raises capital through the sale and issuance of equity, or securities convertible into equity, it would result in dilution to its existing shareholders, which could be significant depending on the price at which it may be able to sell and issue its securities. If it raises additional capital through the incurrence of additional indebtedness, it would likely become subject to further covenants that could restricting its business activities, and holders of debt instruments will likely have rights and privileges senior to those of its equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If NLS is unable to raise capital when needed or on acceptable terms, it could be forced to delay, reduce or eliminate development of new programs or future marketing efforts. Any of these events could significantly harm NLS's business, financial condition and prospects.

The ability of NLS to continue its normal and planned operations and to grow and compete will depend on the availability of adequate capital. NLS cannot assure you that it will be able to obtain equity or debt financing on acceptable terms, or at all, to continue its normal and planned operations and to implement its growth strategy. As a result, NLS cannot assure you that adequate capital will be available to continue its normal and planned operations and to finance its current growth plans, take advantage of business opportunities, or respond to competitive pressures, any of which could harm its business.

Future debt agreements that the combined company may enter into could limit its flexibility in operating its business. Documents governing such future indebtedness, or those in connection with additional capital raises, if any, may contain numerous financial and operating covenants that limit the discretion of management with respect to certain business matters. Restrictive covenants included in these future debt agreements may include restrictions on, among other things, the combined company's ability to: - create or permit to subsist any security interest over any of its assets;- sell, transfer or otherwise dispose of any or its receivables on recourse terms;- pay dividends;- buy back its own common shares;- incur or permit additional indebtedness;- merge or conduct any other corporate reconstruction; and - change the nature of its business. The combined company's ability to comply with these and other provisions of future debt agreements will depend on its future performance, which will be subject to many factors, some of which are beyond its control. The breach of any negative covenants in these future agreements could result in an event of default, as may be defined in such agreements, potentially leading to a default interest rate or immediate repayment of any borrowed amounts. These restrictive covenants, which may be included in future debt agreements, and any lack of compliance by the combined company could limit its flexibility in operating its business.

The combined company may seek collaboration arrangements with pharmaceutical or biotechnology companies for the development or commercialization of its current and potential future product candidates. It may enter into these arrangements on a selective basis depending on the merits of retaining commercialization rights for the combined company as compared to entering into selective collaboration arrangements with other pharmaceutical or biotechnology companies for each product candidate, both in the United States and internationally. It will face, to the extent that the combined company decides to enter into collaboration agreements, significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. The combined company may not be successful in its efforts to establish and implement collaborations or other alternative arrangements should the combined company so choose to enter into such arrangements. The terms of any collaborations or other arrangements that the combined company may establish may not be favorable to itself. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration could adversely affect the combined company financially and could harm its business reputation.

If the benefits of the Merger do not meet the expectations of investors or securities analysts, the market price of common shares prior to the completion of the Merger may decline. The market values of our securities at the time of the Merger may vary significantly from their prices on the date the Merger Agreement was executed. In addition, following the Merger, fluctuations in the price of common shares could contribute to the loss of all or part of your investment. If an active market for common shares develops and continues, the trading price of common shares following the Merger could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. If the benefits of the Merger do not meet the expectations of investors or securities analysts it could have a material adverse effect on your investment in common shares and common shares may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of common shares may not recover and may experience a further decline.

Each of NLS and Kadimastem prior to the closing of the Merger expects to, and NLS following the closing of the Merger may, incur significant costs in connection with the Merger, and may incur other unanticipated costs. While each company has assumed that a certain level of transaction and integration expenses will be incurred, there are factors beyond each company's control that could affect the total amount or the timing of those expenses. Many of the expenses that may be incurred, by their nature, are difficult to estimate accurately at the current time. Each of NLS and Kadimastem expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, may allow NLS to offset those incremental expenses over time, the net benefit of which may not be achieved in the near term, or at all.

In general, the parties to the Merger can refuse to complete the Merger if there is a material adverse change affecting the other party. However, some types of changes do not permit NLS and Kadimastem to refuse to complete the Merger, even if such changes would have a material adverse effect on any of the parties involved in the Merger. For example, if there are changes in general national or international economic, financial, political or business conditions, NLS and Kadimastem would not have the right to refuse to complete the Merger. If adverse changes occur that affect the Merger but the parties are still required to complete the Merger, NLS's share price, business and financial results after the completion of the Merger may suffer.

The Merger Agreement is subject to several conditions, including approval by NLS's shareholders, which must be met or waived prior to the Merger's completion. Some conditions are outside of NLS's control, and there is no assurance that they will be met in a timely manner or at all. The Merger Agreement could be delayed, may not be completed, or may be terminated under certain circumstances. Uncertainty regarding the Merger could adversely impact employee morale and retention, disrupt business relationships, and affect the trading price of common shares. Additionally, management and personnel will need to focus significant time and resources on the Merger, potentially diverting attention from day-to-day operations. NLS will incur significant transaction costs regardless of whether the Merger is finalized, and such expenses may be higher than anticipated, especially if the Merger is delayed or terminated.

NLS may seek to grow through acquisitions. Factors which may affect its ability to grow successfully through acquisitions include: - inability to obtain financing;- difficulties and expenses in connection with integrating the acquired companies and achieving the expected benefits;- diversion of management's attention from current operations;- the possibility that it may be adversely affected by risk factors facing the acquired companies;- acquisitions could be dilutive to earnings, or in the event of acquisitions made through the issuance of common shares to the shareholders of the acquired company, dilutive to the percentage of ownership of its existing shareholders;- potential losses resulting from undiscovered liabilities of acquired companies not covered by the indemnification that it may obtain from the seller; and - loss of key employees of the acquired companies.

Following the Merger, NLS intends to focus on developing and manufacturing "off-the-shelf", allogeneic, proprietary cell products. Future financial results of NLS will suffer if NLS does not effectively manage this shift in business focus. If NLS is unable to obtain capital necessary to maintain and increase its assets, and the assets of NLS, NLS could be required to reduce or suspend its operations or dispose of assets at inopportune time or price, which could negatively affect NLS's financial condition, results of operations and ability to pay or sustain dividends to NLS's shareholders.

Clinical trials may fail or be delayed, regulatory approvals are uncertain, and even if NLS does obtain required regulatory approvals, commercial success is not guaranteed. These risks could increase NLS's post-Merger costs, delay potential revenues, and impact NLS's ability to meet financial targets. Any setbacks in research and development could materially reduce the anticipated benefits of the Merger and impact NLS's financial position and future growth potential. Furthermore, intensified research and development efforts may divert resources from other strategic initiatives, limiting NLS's ability to respond to unforeseen challenges and competitive pressures in a timely manner.

The Merger involves the combination of two companies which currently operate as independent companies. NLS may fail to realize some or all of the anticipated benefits of the Merger if the integration process takes longer than expected or is more costly than expected. Potential difficulties NLS may encounter in the integration process include the following: - the inability to successfully combine the businesses of NLS and Kadimastem in a manner that permits NLS to achieve the anticipated benefits from the Merger, which would result in the anticipated benefits of the Merger not being realized partly or wholly in the time frame currently anticipated or at all;- creation of uniform standards, controls, procedures, policies and information systems; and - potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger. In addition, NLS and Kadimastem have operated and, until the completion of the Merger, will continue to operate, independently. It is possible that the integration process also could result in the diversion of each company's management's attention, the disruption or interruption of, or the loss of momentum in, each company's ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect NLS's ability to maintain its business relationships or the ability to achieve the anticipated benefits of the Merger, or could otherwise adversely affect the business and financial results of NLS.

Following the Merger, NLS intends to shift its business focus to developing and manufacturing "off-the-shelf", allogenic, proprietary cell products, which may not be successful. Planned operations and to grow and compete will depend on the availability of adequate capital. NLS cannot assure you that it will be able to obtain equity or debt financing on acceptable terms, or at all, to adopt its new business, its planned operations and to implement its growth strategy. As a result, NLS cannot assure you that adequate capital will be available to continue its normal and planned operations and to finance its current growth plans, take advantage of business opportunities, or respond to competitive pressures, any of which could harm its business.

The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, among others, that the representations and warranties of the parties are true and correct in all respects as of the closing date, NLS has at least $600,000 in gross funds (including cash in any of its bank accounts) plus any proceeds received by NLS from certain parties in connection with its financing transactions undertake after the execution of the Merger Agreement, Kadimastem has at least $3,500,000 in gross funds (including cash in any of its bank accounts) minus any proceeds received by NLS from certain parties in connection with its financing transactions undertaken after the execution of the Merger Agreement, Kadimastem's receipt of certain tax rulings provided by Israeli Tax Authority and ISA, and approval of the Merger Agreement and terms of the Merger by Kadimastem's shareholders. These conditions make the completion, and the timing of the completion, of the Merger uncertain. Kadimastem has already received a draft tax ruling from the Israeli Tax Authority and believes that it will obtain the final ruling prior to NLS's shareholders' approval of the Merger. Further, the shareholders of Kadimastem have approved the Merger. However, NLS and Kadimastem cannot provide assurance that the Merger will be consummated on the terms or timeline currently contemplated, or at all. If the Merger is not completed on a timely basis, or at all, NLS may be adversely affected and subject to a number of risks, including the time and resources committed by NLS's respective management to matters relating to the Merger could otherwise have been devoted to pursuing other opportunities.

The Merger may be consummated on terms different than those contemplated by the Merger Agreement, or the Merger may not be consummated at all. If the Merger is not completed, or is completed on different terms from those contemplated by the Merger Agreement, NLS could be adversely affected and subject to a variety of risks associated with the failure to consummate the Merger, or to consummate the Merger as contemplated by the Merger Agreement, including the following: - NLS's shareholders may be prevented from realizing the anticipated benefits of the Merger;- the market price of common shares could decline significantly;- reputational harm due to the adverse perception of any failure to successfully consummate the Merger;- incurrence of substantial costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees, and, in certain cases, the payment by NLS of a termination fee to Kadimastem; and - the attention of NLS's management and employees may be diverted from their day-to-day business and operational matters as a result of efforts relating to attempting to consummate the Merger. Any delay in the consummation of the Merger or any uncertainty about the consummation of the Merger on terms other than those contemplated by the Merger Agreement, or if the Merger is not completed, could materially adversely affect the business, financial results and share price of NLS.