PLURISTEM THERAPEUTICS INC - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - PLURISTEM THERAPEUTICS INC	exhibit_32-2.htm
EX-31.1 - EXHIBIT 31.1 - PLURISTEM THERAPEUTICS INC	exhibit_31-1.htm
EX-32.1 - EXHIBIT 32.1 - PLURISTEM THERAPEUTICS INC	exhibit_32-1.htm
EX-31.2 - EXHIBIT 31.2 - PLURISTEM THERAPEUTICS INC	exhibit_31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________

Commission file number 001-31392

PLURISTEM THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0351734
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

MATAM Advanced Technology Park, Building No. 20, Haifa, Israel 31905

(Address of principal executive offices)

+972-74-710-7171

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 20,908,837 common shares issued as of May 11, 2010.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2010

(unaudited)

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2010

U.S. DOLLARS IN THOUSANDS

(Unaudited)

INDEX

	Page
Consolidated Balance Sheets	F-2 - F-3
Consolidated Statements of Operations	F-4
Statements of Changes in Stockholders’ Equity (Deficiency)	F-5 - F-15
Consolidated Statements of Cash Flows	F-16 - F-18
Notes to Consolidated Financial Statements	F-19 - F-35

F - 1

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

U.S. Dollars in Thousands

	March 31,		June 30,
	2010		2009
	Unaudited		Audited

ASSETS

CURRENT ASSETS:

Cash and cash equivalents	$	1,119	$	2,339
Short term deposit		898		-
Prepaid expenses		40		100
Accounts receivable from the Office of the Chief Scientist		226		383
Other accounts receivable		109		113
Total current assets		2,392		2,935

LONG-TERM ASSETS:

Long-term deposits and restricted deposits		180		171
Severance pay fund		270		154
Property and equipment, net		1,243		1,203
Total long-term assets		1,693		1,528

Total assets	$	4,085	$	4,463

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

F - 2

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

U.S. Dollars in Thousands

	March 31,			June 30,
	2010			2009
	Unaudited			Audited
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Trade payables	$	632		$	487
Accrued expenses		62			81
Other accounts payable		431			272
Total current liabilities		1,125			840

LONG-TERM LIABILITIES

Long-term obligation		-			23
Accrued severance pay		332			206
		332			229
STOCKHOLDERS’ EQUITY

Share capital:
Common stock $0.00001 par value:
Authorized: 100,000,000 shares as of March 31, 2010, 30,000,000 shares as of June 30, 2009. Issued: 18,526,693 shares as of March 31, 2010, 14,738,693 shares as of June 30, 2009. Outstanding: 18,089,117 shares as of March 31, 2010, 13,676,886 shares as of June 30, 2009.		- (*	)		- (*	)
Additional paid-in capital		40,991			36,046
Accumulated deficit during the development stage		(38,363	)		(32,652	)
		2,628			3,394

	$	4,085		$	4,463

(*) Less than $1.

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

F - 3

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

U.S. Dollars in Thousands (except share and per share data)

	Nine months ended March 31,						Three months ended March 31,						Period from May 11, 2001 (Inception) through March 31,
	2010			2009			2010			2009			2010

Research and development expenses	$	4,578		$	3,707		$	1,775		$	1,076		$	21,735
Less participation by the Office of the Chief Scientist		(1,274	)		(1,345	)		(285	)		(16	)		(4,524	)
Research and development expenses, net		3,304			2,362			1,490			1,060			17,211
General and administrative expenses		2,413			2,557			768			850			19,786
Know how write-off		-			-			-			-			2,474
Operating loss		(5,717	)		(4,919	)		(2,258	)		(1,910	)		(39,471	)
Financial expenses (income), net		(6	)		150			5			84			(1,108	)
Net loss for the period	$	(5,711	)	$	(5,069	)	$	(2,263	)	$	(1,994	)	$	(38,363	)
Loss per share:
Basic and diluted net loss per share	$	(0.34	)	$	(0.52	)	$	(0.13	)	$	(0.17	)
Weighted average number of shares used in computing basic and diluted net loss per share		16,637,335			9,760,893			18,003,187			11,958,054

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

F - 4

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share data)

	Common Stock						Additional Paid-in			Receipts on Account of Common		Deficit Accumulated During the Development			Total Stockholders’ Equity
	Shares			Amount			Capital			Stock		Stage			(Deficiency)

Issuance of common stock on July 9, 2001		175,500		$	(*	)	$	3		$	-	$	-		$	3
Balance as of June 30, 2001		175,500			(*	)		3			-		-			3
Net loss		-			-			-			-		(78	)		(78	)
Balance as of June 30, 2002		175,500			(*	)		3			-		(78	)		(75	)
Issuance of common stock on October 14, 2002, net of issuance expenses of $17		70,665			(*	)		83			-		-			83
Forgiveness of debt		-			-			12			-		-			12
Stock cancelled on March 19, 2003		(136,500	)		(*	)		(*	)		-		-			-
Receipts on account of stock and warrants, net of finders and legal fees of $56		-			-			-			933		-			933
Net loss		-			-			-			-		(463	)		(463	)
Balance as of June 30, 2003		109,665		$	(*	)	$	98		$	933	$	(541	)	$	490

(*) Less than $1.

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

F - 5

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in		Receipts on Account of Common			Deficit Accumulated During the Development			Total Stockholders’ Equity
	Shares		Amount			Capital		Stock			Stage			(Deficiency)

Balance as of July 1, 2003		109,665	$	(*	)	$	98	$	933		$	(541	)	$	490
Issuance of common stock on July 16, 2003, net of issuance expenses of $70		3,628		(*	)		1,236		(933	)		-			303
Issuance of common stock on January 20, 2004		15,000		(*	)		-		-			-			(*	)
Issuance of warrants on January 20, 2004 for finder’s fee		-		-			192		-			-			192
Common stock granted to consultants on February 11, 2004		5,000		(*	)		800		-			-			800
Stock based compensation related to warrants granted to consultants on December 31, 2003		-		-			358		-			-			358
Exercise of warrants on April 19, 2004		1,500		(*	)		225		-			-			225
Net loss for the year		-		-			-		-			(2,011	)		(2,011	)
Balance as of June 30, 2004		134,793	$	(*	)	$	2,909	$	-		$	(2,552	)	$	357

(*) Less than $1.

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

F - 6

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in		Deficit Accumulated During the Development			Total Stockholders’ Equity
	Shares		Amount			Capital		Stage			(Deficiency)

Balance as of July 1, 2004		134,793	$	(*	)	$	2,909	$	(2,552	)	$	357
Stock-based compensation related to warrants granted to consultants on September 30, 2004		-		-			162		-			162
Issuance of common stock and warrants on November 30, 2004 related to the October 2004 Agreement net of issuance costs of $29		16,250		(*	)		296		-			296
Issuance of common stock and warrants on January 26, 2005 related to the October 2004 Agreement net of issuance costs of $5		21,500		(*	)		425		-			425
Issuance of common stock and warrants on January 31, 2005 related to the January 31, 2005 Agreement		35,000		(*	)		-		-			(*	)
Issuance of common stock and options on February 15, 2005 to former director of the Company		250		(*	)		14		-			14
Issuance of common stock and warrants on February 16, 2005 related to the January 31, 2005 Agreement		25,000		(*	)		-		-			(*	)

(*) Less than $1.

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

F - 7

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in			Deficit Accumulated During the Development		Total Stockholders’ Equity
	Shares		Amount			Capital			Stage		(Deficiency)

Issuance of warrants on February 16, 2005 for finder fee related to the January 31, 2005 Agreement		-		-			144			-		144
Issuance of common stock and warrants on March 3, 2005 related to the January 24, 2005 Agreement net of issuance costs of $24		60,000		(*	)		1,176			-		1,176
Issuance of common stock on March 3, 2005 for finder fee related to the January 24, 2005 Agreement		9,225		(*	)		(*	)		-		-
Issuance of common stock and warrants on March 3, 2005 related to the October 2004 Agreement net of issuance costs of $6		3,750		(*	)		69			-		69
Issuance of common stock and warrants to the Chief Executive Officer on March 23, 2005		12,000		(*	)		696			-		696
Issuance of common stock on March 23, 2005 related to the October 2004 Agreement		1,000		(*	)		20			-		20

(*) Less than $1.

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

F - 8

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in			Deficit Accumulated During the Development			Total Stockholders’ Equity
	Shares		Amount			Capital			Stage			(Deficiency)

Classification of a liability in respect of warrants to additional paid in capital, net of issuance costs of $ 178		-		-			542			-			542
Net loss for the year		-		-			-			(2,098	)		(2,098	)
Balance as of June 30, 2005		318,768		(*	)		6,453			(4,650	)		1,803
Exercise of warrants on November 28, 2005 to finders related to the January 24, 2005 agreement		400		(*	)		-			-			-
Exercise of warrants on January 25 ,2006 to finders related to the January 25, 2005 Agreement		50		(*	)		-			-			-
Reclassification of warrants from equity to liabilities due to application of ASC 815-40 (originally issued as EITF 00-19)		-		-			(8	)		-			(8	)
Net loss for the year		-		-			-			(2,439	)		(2,439	)
Balance as of June 30, 2006		319,218	$	(*	)	$	6,445		$	(7,089	)	$	(644	)

(*) Less than $1.

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

F - 9

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in			Receipts on Account of Common		Accumulated Other Comprehensive		Deficit Accumulated During the Development			Total Stockholders’
	Shares		Amount			Capital			Stock		Loss		Stage			Equity

Balance as of July 1, 2006		319,218	$	(*	)	$	6,445		$	-	$	-	$	(7,089	)	$	(644	)
Conversion of convertible debenture, net of issuance costs of $440		1,019,815		(*	)		1,787			-		-		-			1,787
Classification of a liability in respect of warrants		-		-			360			-		-		-			360
Classification of deferred issuance expenses		-		-			(379	)		-		-		-			(379	)
Classification of a liability in respect of options granted to non-employees consultants		-		-			116			-		-		-			116
Compensation related to options granted to employees and directors		-		-			2,386			-		-		-			2,386
Compensation related to options granted to non-employee consultants		-		-			938			-		-		-			938
Exercise of warrants related to the April 3, 2006 agreement net of issuance costs of $114		75,692		(*	)		1,022			-		-		-			1,022

(*) Less than $1.

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

F - 10

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in			Receipts on Account of Common		Accumulated Other Comprehensive			Deficit Accumulated During the Development			Total Stockholders’			Total Comprehensive
	Shares		Amount			Capital			Stock		Loss			Stage			Equity			Loss

Cashless exercise of warrants related to the April 3, 2006 agreement		46,674		(*	)		(*	)		-		-			-			-
Issuance of common stock on May and June 2007 related to the May 14, 2007 agreement, net of issuance costs of $64		3,126,177		(*	)		7,751			-		-			-			7,751
Receipts on account of shares		-		-			-			368		-			-			368
Cashless exercise of warrants related to the May 14, 2007 issuance		366,534		(*	)		(*	)		-		-			-			-
Issuance of warrants to investors related to the May 14, 2007 agreement		-		-			651			-		-			-			651
Unrealized loss on available for sale securities		-		-			-			-		(30	)		-			(30	)	$	(30	)
Net loss for the year		-		-			-			-		-			(8,429	)		(8,429	)		(8,429	)
Balance as of June 30, 2007		4,954,110	$	(*	)	$	21,077		$	368	$	(30	)	$	(15,518	)	$	5,897			-
Total comprehensive loss																				$	(8,459	)

(*) Less than $1.

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

F - 11

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in			Receipts on Account of Common			Accumulated Other Comprehensive			Deficit Accumulated During the Development			Total Stockholders’			Total Comprehensive
	Shares		Amount			Capital			Stock			Loss			Stage			Equity			Loss

Balance as of July 1, 2007		4,954,110	$	(*	)	$	21,077		$	368		$	(30	)	$	(15,518	)	$	5,897
Issuance of common stock related to investors relation agreements		69,500		(*	)		275			-			-			-			275
Issuance of common stock in July 2007 - June 2008 related to the May 14, 2007 Agreement		908,408		(*	)		2,246			(368	)		-			-			1,878
Cashless exercise of warrants related to the May 14, 2007 Agreement		1,009,697		(*	)		(*	)		-			-			-			-
Compensation related to options granted to employees and directors		-		-			4,204			-			-			-			4,204
Compensation related to options granted to non–employees consultants		-		-			543			-			-			-			543
Realized loss on available for sale securities		-		-			-			-			30			-			30		$	30
Net loss for the year		-		-			-			-			-			(10,498	)		(10,498	)		(10,498	)
Balance as of June 30, 2008		6,941,715	$	(*	)	$	28,345		$	-		$	-		$	(26,016	)	$	2,329
Total comprehensive loss																					$	(10,468	)

(*) Less than $1.

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

F - 12

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in		Deficit Accumulated During the Development			Total Stockholders’
	Shares		Amount			Capital		Stage			Equity

Balance as of July 1, 2008		6,941,715	$	(*	)	$	28,345	$	(26,016	)	$	2,329
Issuance of common stock related to investor relations agreements		171,389		(*	)		133		-			133
Issuance of common stock and warrants related to the August 6, 2008 agreement, net of issuance costs of $125		1,391,304		(*	)		1,475		-			1,475
Issuance of common stock and warrants related to the September 2008 agreement, net of issuance costs of $62		900,000		(*	)		973		-			973
Issuance of common stock and warrants in November 2008 -January 2009, net of issuance costs of $39		1,746,575		(*	)		660		-			660
Issuance of common stock and warrants related to the January 20, 2009 agreement, net of issuance costs of $5		216,818		(*	)		90		-			90
Issuance of common stock and warrants related to the January 29, 2009 agreement, net of issuance costs of $90		969,826		(*	)		1,035		-			1,035
Issuance of common stock and warrants related to the May 5, 2009 agreement, net of issuance costs of $104		888,406		(*	)		1,229		-			1,229
Compensation related to options granted to employees and directors		-		-			1,315		-			1,315
Compensation related to options and warrants granted to non–employee consultants		-		-			97		-			97
Compensation related to restricted stock granted to employees and directors		427,228		(*	)		642		-			642

(*) Less than $1.

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

F - 13

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in		Deficit Accumulated During the Development			Total Stockholders’
	Shares		Amount			Capital		Stage			Equity

Compensation related to restricted stock granted to non–employee consultants		23,625		(*	)		52		-			52
Net loss for the period		-		-			-		(6,636	)		(6,636	)
Balance as of June 30, 2009		13,676,886	$	(*	)	$	36,046	$	(32,652	)	$	3,394

(*) Less than $1.

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

F - 14

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) (UNAUDITED)

U.S. Dollars in thousands (except share and per share data)

	Common Stock					Additional Paid-in		Deficit Accumulated During the Development			Total Stockholders’
	Shares		Amount			Capital		Stage			Equity

Balance as of July 1, 2009		13,676,886	$	(*	)	$	36,046	$	(32,652	)	$	3,394
Issuance of common stock and warrants related to November 2008 through January 2009 agreements		1,058,708		(*	)		794		-			794
Issuance of common stock and warrants related to October 2009 agreements, net of issuance costs of $242		2,702,822		(*	)		2,785		-			2,785
Issuance of common stock related to investor relations agreements		31,787		(*	)		47		-			47
Exercise of options by employee		3,747		(*	)		2		-			2
Compensation related to options granted to employees and directors		-		-			190		-			190
Compensation related to options and warrants granted to non–employee consultants		-		-			148		-			148
Compensation related to restricted stock and restricted stock units granted to employees and directors		590,786		(*	)		923		-			923
Compensation related to restricted stock and restricted stock units granted to non–employee consultants		24,381		(*	)		56		-			56
Net loss for the period		-		-			-		(5,711	)		(5,711	)
Balance as of March 31, 2010		18,089,117	$	(*	)	$	40,991	$	(38,363	)	$	2,628

(*) Less than $1.

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

F - 15

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. Dollars in Thousands

	Nine months ended March 31,						Period from May 11, 2001 (inception) through March 31,
	2010			2009			2010

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss	$	(5,711	)	$	(5,069	)	$	(38,363	)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation		149			128			694
Capital loss		-			-			4
Impairment of property and equipment		-			-			52
Know-how write-off		-			-			2,474
Amortization of deferred issuance costs		-			-			604
Stock-based compensation to employees and directors		1,113			1,399			9,660
Stock-based compensation to non-employees consultants		204			53			2,502
Stock compensation to service providers and investor relations consultants		47			113			1,247
Know-how licensors – imputed interest		-			-			55
Salary grant in shares and warrants		-			-			711
Decrease (increase) in other accounts receivable		161			125			(324	)
Decrease in prepaid expenses		60			241			50
Increase (decrease) in trade payables		132			(165	)		589
Increase (decrease) in other accounts payable and accrued expenses		88			(153	)		(47	)
Increase in accrued interest due to related parties		-			-			3
Linkage differences and interest on long-term restricted lease deposit		3			-			1
Change in fair value of liability in respect of warrants		-			-			(2,696	)
Fair value of warrants granted to investors		-			-			651
Amortization of discount and changes in accrued interest on convertible debentures		-			-			128
Amortization of discount and changes in accrued interest from marketable securities		-			(3	)		(9	)
Loss from sale of investments of available-for-sale marketable securities		-			75			106
Impairment and realized loss on available-for-sale marketable securities		-			-			372
Accrued severance pay, net		10			26			62
Net cash used in operating activities	$	(3,744	)	$	(3,230	)	$	(21,474	)

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

F - 16

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. Dollars in Thousands

	Nine months ended March 31,						Period from May 11, 2001 (inception) through March 31,
	2010			2009			2010

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of Pluristem Ltd. (1)	$	-		$	-		$	32
Purchase of property and equipment		(176	)		(308	)		(1,781	)
Investment in short-term deposits		(2,500	)		-			(2,500	)
Repayment of short-term deposits		1,602			-			1,602
Proceeds from sale of property and equipment		-			-			32
Investment in long-term deposits		(9	)		(6	)		(226	)
Repayment of long-term restricted deposit		-			38			64
Purchase of available for sale marketable securities		-			(240	)		(3,784	)
Proceeds from sale of available for sale marketable securities		-			1,113			3,314
Purchase of know-how		-			-			(2,062	)
Net cash provided by (used in) investing activities		(1,083	)		597			(5,309	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and warrants, net of issuance costs		3,579			4,048			24,970
Exercise of warrants and options		2			-			1,024
Receipts on account of shares		32			-			32
Issuance of convertible debenture		-			-			2,584
Issuance expenses related to convertible debentures		-			-			(440	)
Repayment of know-how licensors		-			-			(300	)
Repayment of notes and loan payable to related parties		-			-			(70	)
Proceeds from notes and loan payable to related parties		-			-			78
Receipt of long-term loan		-			-			49
Repayment of long-term loan		(6	)		(14	)		(25	)
Net cash provided by financing activities		3,607			4,034			27,902

Increase (decrease) in cash and cash equivalents		(1,220	)		1,401			1,119
Cash and cash equivalents at the beginning of the period		2,339			323			-
Cash and cash equivalents at the end of the period	$	1,119		$	1,724		$	1,119

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

F - 17

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. Dollars in Thousands

	Nine months ended March 31,				Period from May 11, 2001 (inception) through March 31,
	2010		2009		2010

(a) Supplemental disclosure of cash flow activities:
Cash paid during the period for:
Taxes paid due to non-deductible expenses	$	4	$	28	$	52
Interest paid	$	2	$	2	$	19

(b) Supplemental disclosure of non-cash activities:
Classification of liabilities and deferred issuance expenses into equity	$	-	$	-	$	97
Conversion of convertible debenture	$	-	$	-	$	2,227
Purchase of property and equipment in credit	$	13	$	-	$	13
Issuance of shares in consideration of accounts receivable	$	-	$	185	$	-

(1) Acquisition of Pluristem Ltd.

Fair value of assets acquired and liabilities assumed at the acquisition date:

Working capital (excluding cash and cash equivalents)					$	(427	)
Long-term restricted lease deposit						19
Property and equipment						130
In-process research and development write-off						246

					$	(32	)

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

F - 18

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 1: - GENERAL

Pluristem Therapeutics Inc. ("the Company"), a Nevada corporation, was incorporated and commenced operations on May 11, 2001, under the name A. I. Software Inc. which was changed as of June 30, 2003 to Pluristem Life Systems Inc. On November 26, 2007, the Company’s name was changed to Pluristem Therapeutics Inc. The Company has a wholly owned subsidiary, Pluristem Ltd. (“the Subsidiary”), which is incorporated under the laws of Israel.

The Company is devoting substantially all of its efforts towards conducting research and development of adherent stromal cells production technology and the commercialization of cell therapy products. Accordingly, the Company is considered to be in the development stage, as defined in Accounting Standards Codification TM (“ASC”) 915 (originally issued as Statement of Financial Accounting Standards (“FAS”) No. 7, “Accounting and Reporting by Development stage Enterprises”). In the course of such activities, the Company and its Subsidiary have sustained operating losses and expect such losses to continue in the foreseeable future. The Company and its Subsidiary have not generated any revenues or product sales and have not achieved profitable operations or positive cash flows from operations. The Company's accumulated losses during the development stage aggregated to $38,363 through March 31, 2010 and incurred net loss of $5,711 and negative cash flow from operating activities in the amount of $3,744 for the nine months ended March 31, 2010. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis.

The Company plans to continue to finance its operations with sales of equity securities and research and development grants and in the longer term, from revenues from product sales or licensing of its technology. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of its planned products.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Since December 10, 2007, the Company’s shares of common stock have been traded on the NASDAQ Capital Market under the symbol PSTI. The shares were previously traded on the OTC Bulletin Board under the trading symbol “PLRS.OB”. On May 7, 2007, the Company’s shares also began trading on Europe’s Frankfurt Stock Exchange, under the symbol PJT.

NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements of Pluristem Therapeutics Inc., a development stage company, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in Pluristem’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-K have been omitted.

F - 19

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

B.	Impact of recently issued accounting standards:

In June 2009, the Financial Accounting Statements Board (“FASB”) issued ASC 105-10-65-1 (“ASC 105”) (originally issued as FAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles", a replacement of SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”). ASC 105 is effective for financial statements for interim and annual periods ending after September 15, 2009. ASC 105 establishes the FASB Accounting Standards Codification ("Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates ("ASU"). The ASU will not be authoritative in their own right as they will only serve to update the Codification. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Company’s Financial Statements. The Company has adopted ASC 105 and therefore all references by the Company to authoritative accounting principles recognized by the FASB reflect the Codification.

In August 2009, the FASB issued ASU No. 2009-05 "Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value" ("ASU 2009-05"). ASU 2009-05 amends Subtopic 820-10 "Fair Value Measurements and Disclosures - Overall" and provides clarification on the methods to be used in circumstances in which a quoted price in an active market for the identical liability is not available. The provisions of ASU 2009-05 were effective for the third quarter of 2009. The adoption of ASU 2009-05 did not have a material impact on the Company’s financial statements.

ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”) amends FASB ASC 820 “Fair Value Measurements and Disclosures” to add new disclosure requirements for significant transfers in and out of Level 1 and 2 measurements and to provide a gross presentation of the activities within the Level 3 rollforward. ASU 2010-06 also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The disclosure requirements in ASU 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the requirement to present the Level 3 rollforward on a gross basis, which is effective for fiscal years beginning after December 15, 2010. The adoption of this guidance did not have a material effect on our consolidated financial statements.

In June 2009, the FASB issued ASU No. 15-1- "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing" (“ASU 15-1”) (formerly issued as EITF 09-1). ASU 15-1 states that a share-lending arrangement entered into on an entity's own shares in contemplation of a convertible debt offering or other financing is required to be measured at fair value and recognized as a debt issuance cost in the financial statements. The debt issuance costs should be amortized using the effective interest method over the life of the financing arrangement as interest cost. In addition, the loaned shares should be excluded from the computations of basic and diluted earnings per share, unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings per share calculation. ASU 15-1 also expanded the disclosure requirements for share-lending arrangements. ASU 15-1 is effective from January 1, 2010. Early adoption was not permitted. Retrospective application is required for all arrangements outstanding in the beginning of the fiscal year in which this Issue is initially applied. This adoption did not have a material impact on the Company’s financial statements.

In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirement”, (“ASU 2010-09”), which amended ASC Topic 855, “Subsequent Events,” including removing the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated. This guidance, except as it relates to conduit debt obligors, is effective upon issuance. The adoption of this guidance did not have a material impact on our consolidated financial statements.

F - 20

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS

On December 22, 2009, the Company’s authorized common stock was increased from 30,000,000 shares with a par value of $0.00001 per share to 100,000,000 shares with a par value of $0.00001 per share. All shares have equal voting rights and are entitled to one vote per share in all matters to be voted upon by stockholders. The shares have no pre-emptive, subscription, conversion or redemption rights and may be issued only as fully paid and non-assessable shares. Holders of the common stock are entitled to equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by the Board of Directors out of funds legally available.

On July 1, 2008, the authorized share capital of the Company was increased by authorizing 10,000,000 shares of preferred stock, par value $0.00001 each, with series, rights, preferences, privileges and restrictions as may be designated from time to time by the Company’s Board of Directors. No shares of preferred stock have been currently issued.

b.	On July 9, 2001, the Company issued 175,500 shares of common stock in consideration for $2.50, which was received on July 27, 2001.

On October 14, 2002, the Company issued 70,665 shares of common stock at a price of approximately $1.4 per common share in consideration for $100 before issuance costs of $17. On March 19, 2003, two directors each returned 68,250 shares of common stock with a par value of $2 per share, for cancellation, for no consideration.

In July 2003, the Company issued an aggregate of 3,628 units comprised of 3,628 shares of common stock and 7,256 warrants to a group of investors, for total consideration of $1,236 (net of issuance costs of $70), under a private placement. The consideration was paid partly in the year ended June 30, 2003 ($933) and the balance was paid in the year ended June 30, 2004.

In this placement each unit was comprised of one share of common stock and two warrants, the first warrant was exercisable within a year from the date of issuance for one share of common stock at a price of $450 per share. The second warrant is exercisable within five years from the date of issuance for one share of common stock at a price of $540 per share. All the warrants expired unexercised.

On January 20, 2004, the Company consummated a private equity placement with a group of investors (the “Investors”). The Company issued 15,000 units in consideration for net proceeds of $1,273 (net of issuance costs of $227). Each unit is comprised of 15,000 shares of common stock and 15,000 warrants. Each warrant is exercisable into one share of common stock at a price of $150 per share, and may be exercised until January 31, 2007. On March 18, 2004, a registration statement on Form SB-2 was declared effective and the above-mentioned common stock was registered for re-sale. If the effectiveness of the Registration Statement is suspended subsequent to the effective date of registration (March 18, 2004), for more than certain permitted periods, as described in the private equity placement agreement, the Company shall pay penalties to the Investors in respect of the liquidated damages.

According to ASC 815-40 (originally issued as Emerging Issued Task Force (“EITF”) 00-19, “Accounting for derivative financial instruments indexed to, and potentially settled in, a Company’s own stock” (“EITF 00-19”)), the Company classified the warrants as liabilities according to their fair value as remeasured at each reporting period until exercised or expired. Changes in the fair value of the warrants were reported in the statements of operations as financial income or expense.

The Company allocated the gross amount received of $1,500 to the par value of the shares issued ($0.03) and to the liability in respect of the warrants issued ($1,499.97). The amount allocated to the liability was less than the fair value of the warrants at grant date. On January 31, 2007 all the warrants expired unexercised.

In addition, the Company issued 1,500 warrants to finders in connection with this private placement, exercisable into 1,500 common shares at a price of $150 per common share until January 31, 2007. The fair value of the warrants issued in the amounts of $192 was recorded as deferred issuance costs and is amortized over a period of three years. On April 19, 2004, the finders exercised the warrants.

F - 21

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

In October 2004, the Company consummated a private placement offering (“the October 2004 Agreement”) pursuant to which it issued 42,500 units. Each unit is comprised of one share of common stock and one warrant. The warrant is exercisable for one common stock at an exercise price of $60 per share, subject to certain adjustments. The units were issued as follows:

In November 2004, the Company issued according to the October 2004 Agreement 16,250 units comprised of 16,250 shares of common stock and 16,250 warrants to a group of investors, for total consideration of $296 (net of cash issuance costs of $29), and additional 600 warrants to finders as finders’ fees.

In January 2005, the Company issued according to the October 2004 Agreement an additional 21,500 units for total consideration of $425 (net of cash issuance costs of $5), and additional 450 warrants were issued to finders as finders’ fees.

In March 2005, the Company issued according to the October 2004 Agreement additional 3,750 units for total consideration of $69 (net of cash issuance costs of $6), and additional 175 warrants were issued to finders as finders’ fees.

In March 2005, the Company issued according to the October 2004 Agreement 1,000 common shares and 1,000 share purchase warrants to one investor for total consideration of $20 which was paid to the Company in May 2005.

On November 30, 2006, all the warrants expired unexercised.

On January 24, 2005, the Company consummated a private placement offering (the “January 24, 2005 Agreement”) which was closed on March 3, 2005 and issued 60,000 units in consideration for $1,176 (net of cash issuance costs of $24). Each unit is compromised of one share of common stock and one warrant. The warrant is exercisable for one share of common stock at a price of $60 per share. On November 30, 2006, all the warrants expired unexercised. Under this agreement the Company issued to finders 9,225 shares and 2,375 warrants with exercise price of $500 per share exercisable until November 2007. On November 30, 2007, 1,925 unexercised warrants expired.

On January 31, 2005, the Company consummated a private equity placement offering (the “January 31, 2005 Agreement”) with a group of investors according to which it issued 60,000 units in consideration for net proceeds of $1,137 (net of issuance costs of $63). Each unit is comprised of one share of common stock and one warrant. Each warrant is exercisable into one share of common stock at a price of $60 per share. The January 31, 2005 Agreement includes a finder’s fee of a cash amount equal to 5% of the amount invested ($60) and issuance of warrants for number of shares equal to 5% of the number of shares that were issued (3,000) with an exercise price of $20 per share, subject to certain adjustments, exercisable until November 30, 2006.

According to ASC 815-40 (originally issued as EITF 00-19), the Company classified the warrants as liabilities according to their fair value as remeasured at each reporting period until exercised or expired. Changes in the fair value of the warrants will be reported in the statements of operations as financial income or expense.

F - 22

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

As of the date of the issuance, the Company allocated the gross amount received of $1,200 to the par value of the shares issued ($0.12) and to the liability in respect of the warrants issued ($1,200). Issuance expenses in the amount of $63 and finders fee in the amount of $144 were recorded as deferred issuance costs. The amount allocated to the liability was less than the fair value of the warrants at grant date. On May 13, 2005, the Registration Statement became effective and the Company was no longer subject to possible penalties. As such, the liability and the deferred issuance costs related to the agreement has been classified to the Stockholders Equity as Additional Paid in Capital. As of May 13, 2005, the fair value of the liability in respect of the warrants issued was $720 and the amount of the deferred issuance costs was $178.

On November 30, 2006, all the warrants expired unexercised.

On March 23, 2005, the Company issued 12,000 shares of common stock and 12,000 options as a bonus to the then Chief Executive Officer, Dr. Shai Meretzki, in connection with the issuance of a Notice of Allowance by the United States Patent Office for patent application number 09/890,401. Salary expenses of $696 were recognized in respect of this bonus based on the quoted market price of the Company’s stock and the fair value of the options granted using the Black–Scholes valuation model. On November 30, 2006, all the warrants expired unexercised.

On February 11, 2004, the Company issued an aggregate amount of 5,000 shares of common stock to a consultant and service provider as compensation for carrying out investor relations activities during the year 2004. Total compensation, measured as the grant date fair market value of the stock, amounted to $800 and was recorded as an operating expense in the statement of operations in the year ended June 30, 2004.

k.	On November 28, 2005, 400 warrants, which were issued to finders as finder fees related to the January 24, 2005 Agreement, were exercised.

l.	On January 25, 2006, 50 warrants, which were issued to finders as finder fees related to the January 24, 2005 Agreement, were exercised.

m.	Convertible Debenture

On April 3, 2006, the Company issued Senior Secured Convertible Debentures (the “Debentures“), for gross proceeds of $3,000. In conjunction with this financing, the Company issued 236,976 warrants exercisable for three years at an exercise price of $15 per share. The Company paid a finder’s fee of 10% in cash and issued 47,394 warrants exercisable for three years, half of which are exercisable at $15 and half of which are exercisable at $15.4 per share. The Company also issued 5,000 warrants in connection with the separate finder’s fee agreement related to the issuance of the debenture exercisable for three years at an exercise price of $15 per share.

Interest accrued on the Debentures at the rate of 7% per annum, was payable semi-annually on June 30 and December 31 of each year and on conversion and at the maturity date. Interest was payable, at the option of the Company, either (1) in cash, or (2) in shares of common stock at the then applicable conversion price. If the Company failed to deliver stock certificates upon the conversion of the Debentures at the specified time and in the specified manner, the Company was required to make substantial payments to the holders of the Debentures.

The warrants, issued as of April 3, 2006, become first exercisable on the 65th day after issuance. Holders of the warrants were entitled to exercise their warrants on a cashless basis following the first anniversary of issuance if the Registration Statement is not in effect at the time of exercise.

F - 23

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

m.	Convertible Debenture (Cont.):

In accordance with ASC 815-40 (originally issued as EITF 00-19), the Company allocated the consideration paid for the convertible debenture and the warrants as follows:

The warrants were recorded as a liability based on their fair value in the amount of $951 at grant date. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model, with the following assumptions: volatility of 83%, risk free interest rate of 4.8%, dividend yield of 0%, and an expected life of 36 months. Changes in the fair value are recorded as interest income or expense, as applicable.

The fair value of the conversion feature of the debentures at grant date, in the amount of $1,951 was recorded as a liability.

The balance of the consideration, in the amount of $97, was allocated to the debentures. The discount in the amount of $2,903 was amortized according to the effective rate interest method over the debentures contractual period (24 months).

The fair value of the warrants issued as a finder’s fee and the finder’s fee in cash amounted to $535 and were recorded as deferred issuance expenses and are amortized over the Debentures’ contractual period. The Company estimated the fair value of the warrants using a Black - Scholes option pricing model, with the following assumptions: volatility of 83%, risk free interest rate of 4.8%, dividend yield of 0%, and an expected life of 36 months.

According to ASC 815-40 (originally issued as EITF 00-19), in order to classify warrants and options (other than employee stock options) as equity and not as liabilities, the Company should have sufficient authorized and unissued shares of common stock to provide for settlement of those instruments that may require share settlement. Under the terms of the Debentures, the Company may be required to issue an unlimited number of shares to satisfy the debenture’s contractual requirements. As such, on April 3, 2006, the Company’s warrants and options (other than employee stock options) were classified as liabilities and measured at fair value with changes recognized currently in earnings.

As of November 9, 2006, all of the Debentures, were converted into 969,815 shares. As a result, an amount of $1,787 was reclassified into common stock and additional paid-in capital as follows: from conversion of the feature embedded in convertible debenture ($1,951), convertible debenture ($202), accrued interest ($74) net of issuance expenses in the amount of $440. In addition, the warrants and options to consultants in the amount of $476 and deferred issuance expenses in the amount of $379 were reclassified as equity.

Pursuant to an investor relations agreement dated April 28, 2006, the Company paid in cash an amount of $440 on October 19, 2006 and issued 50,000 common shares on November 9, 2006 to certain service providers following reaching certain milestones regarding the conversion of the Debentures as agreed to by the parties.

During the year ended June 30, 2007, 186,529 of the warrants which were issued on April 3, 2006, were exercised. 75,692 warrants were exercised into shares in consideration for $1,022 (net of cash exercise costs of $114), and 110,836 warrants were exercised cashless into 46,674 shares. On April 30, 2009, the rest of the warrants expired unexercised.

F - 24

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

On May 14, 2007, the Company consummated a private equity placement with a group of investors for an equity investment (“May 2007 Agreement”). The Company sought a minimum of $7,000 and up to a maximum of $13,500 for shares of the Company’s common stock, $.00001 par value at a per share price of $2.50, and warrants to purchase shares at an exercise price of $5 exercisable until five years after the closing date of the agreement.

In May 2007, under the May 2007 Agreement, the Company issued 3,126,177 shares of the Company’s common stock and 3,126,177 warrants to purchase the Company’s common stock in consideration for $7,751 (net of cash issuance costs of $64).

During July and August 2007, under the May 2007 Agreement, the Company issued additional 273,828 shares of the Company’s common stock and 273,828 warrants to purchase the Company’s common stock in consideration for $685. The consideration was paid partly prior to the issuance of the shares in the year ended June 30, 2007 ($368) and was recorded as receipts on account of shares and the balance was paid during July and August 2007.

As part of May 2007 Agreement, the Company signed an escrow agreement according to which the Company granted an option to an investor to invest, under the same conditions defined in the May 2007 Agreement, up to $5,000 which will be paid in monthly installments over 10 months starting six months subsequent to the closing date. According to the agreement, in the event that the investor fails to make any of the payments within five days of the payment due date, the option to invest the remaining amount will be cancelled. As a result of this agreement, the Company issued 634,580 shares of the Company’s common stock and 634,580 warrants to purchase the Company’s common stock in consideration for $1,561 (net of cash issuance costs of $25). As of March 31, 2008 the option was cancelled.

The total proceeds related to the May 2007 Agreement accumulated as of June 30, 2008 were $9,997 (net of cash issuance costs of $89), and 4,034,585 shares and 4,034,585 warrants were issued.

In connection with the May 2007 Agreement, the Company issued 275,320 warrants to finders as finders’ fee. The warrants are exercisable for five years from the date of grant at an exercise price of $2.50 per share.

During 2008 and 2007, 1,361,818 and 500,000 warrants related to the May 2007 Agreement were exercised on a cashless basis for 1,009,697 shares of stock and 366,534 shares of stock, respectively.

The Company issued 28,398 warrants to the investors related to the May 2007 Agreement as compensation to investors who delivered the invested amount prior to the closing date of the placement. The warrants are exercisable for five years at an exercise price of $2.50 per share. The Company recorded the fair value of the warrants as financial expenses in the amount of $651 in the year ended June 30, 2007. The fair value of these warrants was determined using the Black-Scholes pricing model, assuming a risk free rate of 4.8%, a volatility factor of 128%, dividend yield of 0% and expected life of five years.

In the May 2007 Agreement, there is a provision that requires the Company for a period of four years (subject to acceleration under certain circumstances) not to sell any of the Company’s common stock for less than $0.0125 per share (pre-split price). The May 2007 Agreement provides that any sale below that price must be preceded by consent from each purchaser in the placement. Since that date, the Company had effected a one-for-200 reverse stock split.

F - 25

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

(Cont.):

The Company decided to proceed and enter into additional security purchase agreements notwithstanding this provision for the following reasons:

The agreement does not contain any provisions for the adjustment of the specified minimum price in the event of stock splits and the like. If such agreement were to have contained such a provision, the floor price would be $2.50.

The majority of purchasers in the private placement have sold the stock purchased in the placement, and thus the number of purchasers whose consent is purportedly required has been substantially reduced. The number of shares outstanding as to which this provision currently applies according the information supplied by transfer agent is 1.8 million shares.

An agreement that prevents the Company’s Board of Directors from issuing shares that are necessary to finance the Company’s business may be unenforceable.

It is unclear what could be the consequences of a court decision that the issuance of shares below $2.50 per share violates the May 2007 Agreement.

In connection therewith, the Company approved the issuance of warrants to purchase up to 147,884 shares of its common stock to each of the investors who was a party to the May 2007 Agreement that held shares purchased pursuant to such agreement, as of August 6, 2008, conditioned on having the investors execute a general release pursuant to which the Company will be released from liability including, but not limited to, any claims, demands, or causes of action arising out of, relating to, or regarding sales of certain equity securities notwithstanding the above mentioned provision. As of March 31, 2010 the Company received a general release from part of the investors, and issued them warrants to purchase 82,143 shares of its common stock.

On August 6, 2008, the Company sold 1,391,304 shares of the Company’s common stock and warrants to purchase 695,652 shares of common stock at an exercise price of $1.90 to two investors in consideration of $1,600 pursuant to terms of a securities purchase agreement. The placement agent received a placement fee equal to 6% of the gross purchase price of the Units (excluding any consideration that may be paid in the future upon exercise of the warrants) as well as warrants to purchase 83,478 shares of common stock at an exercise price of $1.44 per share. The warrants will be exercisable after six months from the closing date through and including August 5, 2013. Total cash issuance costs related to this placement amounted to $125.

On September 22, 2008, the Company sold 900,000 shares of the Company’s common stock and warrants to purchase 675,000 shares of common stock to an investor in consideration for $1,035 pursuant to terms of a securities purchase agreement. The price per share of common stock was $1.15, and the exercise price of the warrants is $1.90. The warrants will be exercisable for a period of five years. As part of this transaction, the Company paid a transaction fee to the finders equal to 6% of the actual purchase price and warrants exercisable for five years at an exercise price of $1.50 per share to purchase 54,000 of the Company’s shares of common stock. Total cash issuance costs related to this placement amounted to $62.

F - 26

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

From November 2008 through January 2009, the Company entered into a securities purchase agreement with investors, pursuant to which the Company sold 1,746,575 shares of its common stock at a price of $0.40 per share, for an aggregate purchase price of $699, and issued warrants to purchase up to an additional 1,746,575 shares of common stock with an exercise price of $1.00 per share. The warrants will be exercisable after six months from the closing date and will expire after five years. Pursuant to the agreement, the investors have the option, by notice to the Company no later than 10 business days following the release of an official announcement by the Company that it is initiating its first human clinical trials, to purchase an additional 931,507 shares of common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $699, and receive therewith warrants to purchase up to an additional 931,507 shares of common stock with an exercise price of $1.50 per share.

The issuance costs include $39 in cash and warrants exercisable for five years at an exercise price of $1.00 per share to purchase 96,579 of the Company’s shares of common stock.

On January 20, 2009, the Company sold 216,818 shares of its common stock and warrants to purchase 216,818 shares of common stock to investors in consideration for $95 pursuant to terms of a securities purchase agreement. The price per share of common stock is $0.44, and the exercise price of the warrants is $1.00 per share. The warrants will be exercisable after six months from the closing date and will expire after five years. Pursuant to the agreement, the investors have the option, by notice to the Company no later than 10 business days following the release of an official announcement by the Company that it is initiating its first human clinical trials, to purchase an additional 127,200 shares of common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $95, and receive therewith warrants to purchase up to an additional 127,200 shares of common stock with an exercise price of $1.50 per share (the “January 20 Option”). The January 20 Option is exercisable within six months from the closing date. As part of this transaction, the Company paid a transaction fee to finders in an amount of $5 in cash and issued them warrants exercisable for two years at an exercise price of $1.00 per share to purchase 12,273 shares of the Company’s common stock.

On January 29, 2009, the Company entered into a subscription agreement with certain investors, pursuant to which the Company sold to such investors 969,826 units, each unit consisting of one share of common stock and a warrant to purchase one of the Company’s share of common stock ("Unit"). The purchase price per Unit was $1.16 and the aggregate purchase price for the said Units was approximately $1,125. The warrants are exercisable 181 days following the issuance thereof for a period of five years thereafter at an exercise price of $1.90 per share. The Company paid a transaction fee to finders in an amount of $90 in cash and issued them warrants exercisable after six months for five years at an exercise price of $1.90 per share to purchase 80,983 shares of the Company’s common stock.

On May 5, 2009, the Company entered into securities purchase agreements with two investors pursuant to which the Company sold 888,406 shares of its common stock and warrants to purchase 488,623 shares of common stock in consideration for $1,333. The exercise price of the warrants is $1.96 per share and they will be exercisable for a period of five years commencing six months following the issuance thereof.

The Company paid a transaction fee to finders in an amount of $104 in cash and issued them warrants exercisable after six months for five years at an exercise price of $1.875 per share to purchase 53,304 shares of the Company’s common stock.

On July 7, 2009, the Company announced that the first patient has been enrolled in a Phase I clinical trial of its PLX-PAD product. Upon the occurrence of such event, certain investors had an option from prior agreements from November 2008 through January 2009 to purchase additional shares and warrants. Accordingly, certain investors purchased in July 2009, 1,058,708 shares of common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $794, and warrants to purchase up to an additional 1,058,708 shares of common stock with an exercise price of $1.50 per share. The warrants will be exercisable for a period of 4 years and six months commencing six months following the issuance.

F - 27

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands (except per share amounts)

NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.)

On October 12, 2009, certain institutional investors purchased 2,702,822 shares of the Company’s common stock and warrants to purchase 1,081,129 shares of Common Stock. The price per share of common stock was $1.12, and the exercise price of the warrants was $1.60 per share. The warrants will be exercisable for a period of five years commencing six months following the issuance thereof. The gross proceeds received from this offering were approximately $3,027. Total cash costs related to this placement amounted to $242.

y.	The following table summarizes the issuance of shares to the Company’s consultants and service providers as compensation for their services since July 1, 2007:

Number of shares issued

Fair market value of the shares issued at the issuance date

Expenses in the statements of operations for the

Period of service

Year ended

June 30, 2008

Year ended

June 30, 2009

Nine months ended March 31, 2010

PLURISTEM THERAPEUTICS INC - FORM 10-Q - May 11, 2010

Attached files