10-Q

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 September 30, 2008

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 small business issuer 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

(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 8,395,269 common shares issued outstanding as of October 23, 2008.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2008

(Unaudited)

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2008

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-13

Consolidated Statements of Cash Flows	F-14-F-16

Notes to Consolidated Financial Statements	F-17-F-32

F - 1

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

U.S. Dollars in thousands

	September 30, 2008		June 30, 2008




ASSETS

CURRENT ASSETS:

Cash and cash equivalents	$	1,978	$	323
Marketable securities		-		1,185
Prepaid expenses		393		350
Accounts receivable from the Office of Chief Scientist		117		119
Other accounts receivables		173		130

Total current assets		2,661		2,107


LONG-TERM ASSETS:

Long-term restricted deposits		178		201
Severance pay fund		148		127
Property and equipment, net		1,189		1,149

Total long-term assets		1,515		1,477


Total assets	$	4,176	$	3,584

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 (UNAUDITED)

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

	September 30, 2008			June 30, 2008




LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Trade payables	$	403		$	622
Accrued expenses		193			154
Other accounts payable		257			296

Total current liabilities		853			1,072


LONG-TERM LIABILITIES

Long-term obligation		33			36
Accrued severance pay		163			147

		196			183


STOCKHOLDERS' EQUITY

Share capital:
Preferred stock $0.00001 par value:
Authorized: 10,000,000 shares as of September 30, 2008.
Common stock $0.00001 par value:
Authorized: 30,000,000 shares.
Issued and outstanding: 9,275,269 shares and 6,941,715
shares as of September 30, 2008 and June 30, 2008,
respectively.		- (*)			- (*)
Additional paid-in capital		31,385			28,345
Accumulated deficit during the development stage		(28,258	)		(26,016	)

		3,127			2,329


	$	4,176		$	3,584

(*)	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 STATEMENTS OF OPERATIONS (UNAUDITED)

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

	Three months ended September 30,						Period from May 11, 2001 (Inception) through September 30,
	2008			2007			2008



Research and development expenses	$	1,193		$	1,246		$	13,558

Less participation by the Office of the Chief
Scientist		-			(409	)		(1,599	)

Research and development expenses, net		1,193			837			11,959

General and administrative expenses		1,003			1,557			14,959

Know how write-off		-			-			2,474


Operating loss		(2,196	)		(2,394	)		(29,392	)

Financial expenses (income), net		46			(114	)		(1,134	)


Net loss for the period	$	(2,242	)	$	(2,280	)	$	(28,258	)


Loss per share :
Basic and diluted net loss per share	$	(0.29	)	$	(0.39	)


Weighted average number of shares used in
computing basic and diluted net loss
per share :		7,699,352			5,794,562

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) (UNAUDITED)

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

	Common Stock					Additional paid-in Capital		Receipts on account of common stock		Deficit Accumulated during the Development Stage			Total Stockholders' Equity (Deficiency)
	Shares			Amount		Additional paid-in Capital		Receipts on account of common stock		Deficit Accumulated during the Development Stage			Total Stockholders' Equity (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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital		Receipts on account of common stock			Deficit Accumulated during the Development stage			Total Stockholders' Equity (Deficiency)
	Shares		Amount		Additional paid-in Capital		Receipts on account of common stock			Deficit Accumulated during the Development stage			Total Stockholders' Equity (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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital		Deficit Accumulated during the Development stage			Total Stockholders' Equity (Deficiency)
	Shares		Amount		Additional paid-in Capital		Deficit Accumulated during the Development stage			Total Stockholders' Equity (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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital		Deficit Accumulated during the Development stage		Total Stockholders' Equity (Deficiency)
	Shares		Amount		Additional paid-in Capital		Deficit Accumulated during the Development stage		Total Stockholders' Equity (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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital			Deficit Accumulated during the Development stage			Total Stockholders' Equity (Deficiency)
	Shares		Amount		Additional paid-in Capital			Deficit Accumulated during the Development stage			Total Stockholders' Equity (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 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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital			Receipts on account of common stock		Accumulated other comprehensive loss		Deficit Accumulated During the Development stage			Total Stockholders' Equity
	Shares		Amount		Additional paid-in Capital			Receipts on account of common stock		Accumulated other comprehensive loss		Deficit Accumulated During the Development stage			Total Stockholders' 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		-		-		2,386			-		-		-			2,386

Compensation related to
options granted to non-
employees 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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital		Receipts on account of common stock		Accumulated other comprehensive loss			Deficit Accumulated During the Development stage			Total Stockholders' Equity			Total comprehensive loss
	Shares		Amount		Additional paid-in Capital		Receipts on account of common stock		Accumulated other comprehensive loss			Deficit Accumulated During the Development stage			Total Stockholders' Equity			Total comprehensive 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
Unrealizd 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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital		Receipts on account of common stock			Accumulated other comprehensive loss			Deficit Accumulated During the Development stage			Total Stockholders' Equity			Total comprehensive loss
	Shares		Amount		Additional paid-in Capital		Receipts on account of common stock			Accumulated other comprehensive loss			Deficit Accumulated During the Development stage			Total Stockholders' Equity			Total comprehensive 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		-		-		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) (UNAUDITED)

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

	Common Stock				Additional paid-in Capital		Deficit Accumulated During the Development stage			Total Stockholders' Equity
	Shares		Amount		Additional paid-in Capital		Deficit Accumulated During the Development stage			Total Stockholders' Equity



Balance as of July 1, 2008		6,941,715	$	(*)	$	28,345	$	(26,016	)	$	2,329
Issuance of common stock
related to investors relation
agreements		42,250		(*)		49		-			49
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
Compensation related to
options granted to
employees		-		-		520		-			520
Compensation related to
options granted to
non-employees consultants		-		-		23		-			23
Net loss for the period		-		-		-		(2,242	)		(2,242	)

Balance as of September 30, 2008		9,275,269	$	(*)	$	31,385	$	(28,258	)	$	3,127

(*)	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)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. Dollars in thousands

	Three months ended September 30,						Period from May 11, 2001 (inception) through September 30
	2008			2007			2008



CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss	$	(2,242	)	$	(2,280	)	$	(28,258	)

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

Depreciation		42			21			414
Capital loss		-			-			4
Impairment of property and equipment		-			-			47
Know-how write-off		-			-			2,474
Amortization of deferred issuance costs		-			-			604
Stock-based compensation to employees		520			1,268			7,110
Stock-based compensation to non-employees consultants		23			336			2,172
Stock compensation to service providers and investor
relations consultants		49			71			1,116
Know-how licensors - imputed interest		-			-			55
Salary grant in shares and warrants		-			-			711
Increase in other accounts receivable		(41	)		(577	)		(279	)
Increase in prepaid expenses		(43	)		(211	)		(303	)
Increase (decrease) in trade payables		(118	)		167			393
Decrease in other accounts payable and
accrued expenses		(62	)		(91	)		(101	)
Increase in accrued interest due to related parties		-			-			3
Linkage differences and interest on long-term
restricted lease deposit		-			-			(2	)
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	)		11			(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		(5	)		2			15

Net cash used in operating activities		(1,805	)		(1,283	)		(15,273	)

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

F - 14

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. Dollars in thousands

	Three months ended September 30,						Period from May 11, 2001 (inception) through September 30
	2008			2007			2008



CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of Pluristem Ltd. (1)		-			-			32
Purchase of property and equipment		(183	)		(164	)		(1,475	)
Proceeds from sale of property and equipment		-			-			32
Investment in long-term deposits		(2	)		(2	)		(211	)
Repayment of long-term restricted deposit		25			-			51
Purchase of available for sale marketable securities		-			-			(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		953			(166	)		(4,103	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and warrants, net of issuance costs	$	2,510		$	316		$	18,439
Exercise of warrants		-			-			1,022
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					43			49
Repayment of long-term loan		(3	)		(1	)		(8	)

Net cash provided by financing activities		2,507			358			21,354


Increase (decrease) in cash and cash equivalents		1,655			(1,091	)		1,978
Cash and cash equivalents at the beginning of the period		323			1,653			-

Cash and cash equivalents at the end of the period	$	1,978		$	562		$	1,978


(a) Supplemental disclosure of cash flow activities:
Cash paid during the period for:
Taxes paid due to non-deductible expenses	$	2		$	1		$	16

Interest paid	$	1		$	1		$	14

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

	There months ended September 30,				Period from May 11, 2001 (inception) through September 30
	2008		2007		2008



(b) Supplemental disclosure of non-cash activities:
Classification of liabilities and deferred issuance
expenses into equity	$	-	$	-	$	97

Conversion of convertible debenture	$	-	$	-	$	2,227

Decrease in fair value of marketable securities	$	-	$	54	$	-

Issuance costs	$	62	$	-	$	62


(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 - 16

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 statement of Financial Accounting Standards 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 deficit accumulated during the development stage aggregated to $28,258 through September 30, 2008 and incurred net loss of $2,242 and negative cash flow from operating activities in the amount of $ 1,805 for the three months ended September 30, 2008. 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 private placements and R&D grants and in the longer term, from revenues from product sales. 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.

As of December 10, 2007, the Company’s shares of common stock were 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.

F - 17

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

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.

b.	Impact of recently issued accounting standards:

For the period ended September 30, 2008, there were no changes to our critical accounting policies as identified in our annual report of Form 10-K for the year ended June 30, 2008.

NOTE 3: – SHARE CAPITAL AND STOCK OPTIONS

The Company’s authorized common stock consists of 30,000,000 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 amended to include 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.

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 3: – SHARE CAPITAL AND STOCK OPTIONS (CONT.)

B.	On July 9, 2001, the Company issued 175,500 shares of common stock in consideration for $2.5, 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.

C.	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 common stock and 7,255 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 common stock and two warrants, the first warrant is exercisable for one common stock at a price of $450 per stock, and may be exercised within one year. The second warrant is exercisable for one common stock at a price of $540 per stock, and may be exercised within five years. All the warrants were 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 common stock and 15,000 warrants. Each warrant is exercisable into one common stock at a price of $150 per stock, and may be exercised until January 31, 2007. On March 18, 2004, a registration statement on Form SB-2 has been declared effective and the above-mentioned common stock have been registered for trading. 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.

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 were 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 3 years. On April 19, 2004, the finders exercised the warrants.

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 3: – SHARE CAPITAL AND STOCK OPTIONS (CONT.)

In October 2004 the Company commenced a private placement offering (“the October 2004 Agreement”) pursuant to which it issued 42,500 units. Each unit is comprised of one common stock and one warrant. The warrant is exercisable for one common stock at an exercise price of $60 per stock, 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 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’ fee.

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’ fee.

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’ fee.

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 were paid to the Company in May 2005.

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

On January 24, 2005 the Company commenced 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 common stock and one warrant. The warrant is exercisable for one common stock at a price of $60 per stock. On November 30, 2006, all the warrants were expired unexercised. Under this agreement the Company issued to finders 9,225 shares and 2,375 warrants with exercise price of $500 per stock exercisable until November 2007. On November 30, 2007, 1,925 unexercised warrants were expired.

On January 31, 2005, the Company consummated a private equity placement offering (the “January 31, 2005 Agreement”) with a group of investors (the “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 common stock and one warrant. Each warrant is exercisable into one common stock at a price of $60 per stock. If the Registration Statement covering the Registrable Securities was not filed as contemplated by 70 days and if the Registration Statement covering the Registrable Securities was not effective until August 31, 2005, the Company would have paid the Investor 2% of the purchase price for each 30 day period beyond the applicable date until the filing or the registration is completed. 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 stock, subject to certain adjustments, exercisable until November 30, 2006.

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 (CONT.)

According to EITF 00-19, “Accounting for derivative financial instruments indexed to, and potentially settled in, a Company’s own stock”, 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.

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 became no longer under 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 were expired unexercised.

On March 23, 2005, the Company issued 12,000 shares of common stock and 12,000 options as a bonus to the 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 were expired unexercised.

On February 11, 2004, the Company issued an aggregate amount of 5,000 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 in related to the “January 24, 2005 Agreement”, were exercised to shares.

L.	On January 25, 2006, 50 warrants, which were issued to finders as finder fees in related to the “January 24, 2005 Agreement”, were exercised to shares.

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.)

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. 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. 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.

1a.

The Debentures, which mature on April 3, 2008, are convertible to common shares at the lower of 75% of the volume weighted average trading price for the 20 days prior to issuance of a notice of conversion by a holder of a Debentures or, if while the Debentures remain outstanding the Company enters into one or more financing transactions involving the issuance of common stock or securities convertible or exercisable for common stock, the lowest transaction price for those new transactions.

Interest accrues on the Debentures at the rate of 7% per annum, is payable semi-annually on June 30 and December 31 of each year and on conversion and at the maturity date. Interest is 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 fails to deliver stock certificates upon the conversion of the Debentures at the specified time and in the specified manner, the Company will be required to make substantial payments to the holders of the Debentures.

1b.

The Warrants, issued as of April 3, 2006, become first exercisable on the earliest of (i) the 65th day after issuance or (ii) the effective date of the Registration Statement. Holders of the Warrants are 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.

In accordance with EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and potentially settled in a Company’s Own Stock” (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 and 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.

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.)

M.	Convertible Debenture (cont.):

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 the effective rate interest method over the debentures contractual period (24 months).

The fair value of the warrants issued as finder’s fee and the finder’s fee in cash amounted to $535 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 and 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 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 convertible debentures dated April 3, 2006, 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 convertible debentures, which were issued on April 3, 2006, 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 follow: 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 relation agreements dated April 28, 2006 and August 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 Convertible Debenture 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.

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.)

On May 14, 2007, the Company consummated a private equity placement with a group of investors (the “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 $2.5, 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 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 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 May 2007 agreement up to $5,000 which will be paid in monthly instalments 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.

Pursuant to the 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 $2.5.

During year 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.

In the subscription agreement for the May 2007 equity financing, 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. The May 2007 Agreement provides that any sale below that number 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.

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.

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.)

(Cont.):

—

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 1.9 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.

Currently, the Company is in discussions with some of the purchasers in order to settle this matter.

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 $2.5. 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 5 years.

During July and September 2007, the Company issued 10,000 shares of common stock to service providers pursuant to an investor relations agreement, whereby the services will be provided to the Company for a period of 6 month in consideration for a monthly retainer payments and for the issuance of 10,000 shares of common stock of the Company. Total compensation, measured as the grant date fair market value of the stock, amounted to $149.

According to EITF 00-18 “Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees” the Company should recognize expense as services are received. Consequently, total compensation amounted to $149 was recorded as an operating expense in the statement of operations for the year ended June 30, 2008.

In February 2008, the Company issued 7,500 shares of common stock to a service provider as compensation for carrying out investor relations activities. Total compensation, measured as the grant date fair market value of the stock, amounted to $18 and was recorded as an operating expense in the statement of operations for the year ended June 30, 2008.

In February 2008, the Company entered into an investor relations agreements pursuant to which the service will be provided to the Company in consideration for a monthly retainer payment and for a monthly issuance of 500 shares of common stock of the Company. The Company recorded the fair value of the stock at each grant date as operating expenses in the statement of operation. An amount of $6 was recorded during the year ended June 30, 2008, and an amount of $2 was recorded during the three months ended September 30, 2008.

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.)

In April 2008, the Company issued 50,000 shares of common stock to a service provider as compensation for carrying out investor relations activities for a period of three months starting April 4, 2008. Total compensation, measured as the grant date fair market value of the stock, amounted to $102 and was recorded as an operating expense in the statement of operations for the year ended June 30, 2008.

In July 2008, the Company issued 40,000 shares of common stock to a service provider as compensation for carrying out investor relations activities. Total compensation, measured as the grant date fair market value of the stock, amounted to $46 and was recorded as an operating expense in the statement of operations for the three months ended September 30, 2008.

U.	Pursuant to an investor relations agreement, the Company issued 750 shares of common stock to an investor relations consultant in consideration for $1.

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 is $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 is obligated to pay a transaction fee to the finders equal to 6% of the actual Purchase Price and 41,400 warrants exercisable for five-years at an exercise price of $1.50 per share to purchase 41,400 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.)

X.	Options to employees and consultants:

On August 28, 2008, the Company’s Board of Directors approved the reservation of an additional 90,000 of common stock for the Company’s 2005 option plan (the “2005 Plan”).

Each option granted under the Plans is exercisable through the expiration date of the Plan unless stated otherwise. The exercise price of the options granted under the plan may not be less than the nominal value of the stock into which such options are exercised. The options vest primarily over two years with a six month grace period (i.e. vesting equally monthly during the remaining 18 months) unless other vesting schedules are specified. Any options that are cancelled or forfeited before expiration become available for future grants.

Options to employees:

On August 28, 2008 the Company granted 97,500 options exercisable at a price of $1.04 per share to the Company’s employees and directors under the 2005 Plan. The fair value of these options at the grant date was $91.

The Company accounted for its options to employees and directors under the fair value method in accordance of SFAS 123(R). The fair value for these options was estimated using Black-Scholes option-pricing model with the following weighted-average assumptions: risk-free interest rates of 3.26%, expected dividend yield of 0%, expected volatility of 129%, and a weighted-average contractual life of the options of up to 6 years.

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.)

X.	Options to employees and consultants (cont.):

A summary of the Company’s share option activity for options granted to employees under the Plans is as follows:

	Three months ended September 30, 2008
	Number			Weighted Average Exercise Price		Weighted average remaining contractual terms (in years)		Aggregate intrinsic value price




Options outstanding at beginning of year		1,714,181		$	4.93
Options granted		97,500			1.04

Options forfeited		(3,716	)		3.51


Options outstanding at end of the period		1,807,965		$	4.72		8.41	$	-


Options exercisable at the end of the period		1,216,771		$	4.75		8.11	$	-


Options vested and expected to vest		1,778,405		$	4.72		8.40	$	-

Intrinsic value of exercisable options (the difference between the Company’s closing stock price on the last trading day in the period and the exercise price, multiplied by the number of in-the-money options) represents the amount that would have been received by the employees and directors option holders had all option holders exercised their options on September 30, 2008. This amount changes based on the fair market value of the Company’s stock.

F - 28

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.)

X.	Options to employees and consultants (cont.):

Options to employees (cont.):

The Company’s outstanding options to employees as of September 30, 2008, have been separated into ranges of exercise prices as follows:

Exercise Price per Share




$ 1.04	97,500	-	9.91

$ 3.5	976,053	819,924	8.09

$3.72 - $3.8	31,220	27,772	7.61

$ 4	42,500	38,750	8.05

$4.38 - $4.4	473,123	218,444	8.77

$ 6.8	36,250	15,107	9.13

$ 8.2	51,877	28,972	8.69

$ 20	99,329	67,689	8.35

$ 24	113	113	0.15

	1,807,965	1,216,771

Compensation expenses related to options granted to employees were recorded to research and development expenses and general and administrative expenses, as follows:

	Three months ended September 30,				Period from inception through September 30,
	2008		2007		2008



Research and development expenses	$	158	$	550	$	2,294
General and administrative expenses		362		718		4,816


	$	520	$	1,268	$	7,110

F - 29

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.)

X.	Options to employees and consultants (cont.):

Options to consultants:

On September 1, 2008, the Company entered into a consulting agreement. Pursuant to the agreement the Company granted the consultant fully vested warrants to purchase 15,000 shares of the Company’s Common Stock effective upon signing the contract. The warrants were not granted under the OptionsPlans. According the agreement additional warrants to purchase 35,000 shares of the Company’s Common Stock will be granted subject to a service condition. As of September 30, 2008 the Company assumes that the service condition of this grant will not be achieved and the warrants will not be granted. The Company did not record any expenses related to the service based warrants. All warrants are exercisable for 5 years at an exercise price of $1.91 per share.

The fair value of the15,000 warrants was $13. The Company accounted for its options to consultants under the fair value method in accordance of SFAS 123 and EITF 96-18. The fair value for these options was estimated using Black-Scholes option-pricing model with the following weighted-average assumptions: risk-free interest rates of 3.10%, expected dividend yield of 0%, expected volatility of 129%, and a weighted-average contractual life of the options of 5 years.

A summary of the Company’s share option activity related to options and warrants to consultants is as follows:

	Three months ended September 30, 2008
	Number		Weighted Average Exercise Price		Weighted average remaining contractua terms (in years)		Aggregate intrinsic value price



Options outstanding at
beginning of year		212,000	$	7.92
Options granted		15,000		1.91
Options forfeited		-		-

Options outstanding at end
of the period		227,000	$	7.52		6.35	$	-

Options exercisable at the
end of the period		172,470	$	7.29		5.50	$	-

Options vested and expected
to vest		227,000	$	7.52		6.35	$	-

F - 30

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.)

X.	Options to employees and consultants (cont.):

Options to consultants (cont.):

The Company’s outstanding options to consultants as of September 30, 2008, have been separated into ranges of exercise prices as follows:


Exercise Price per Share		Options for Common Stock		Options Exercisable		Weighted average remaining contractual terms



	$ 1.91		15,000		15,000		4.92

	$ 2.5		50,000		50,000		1.58

	$ 2.97		20,000		-		9.61

	$ 3.5		52,500		43,785		8.32

	$ 3.8		5,000		4,385		8.24

	$ 4.38 - $4.4		25,500		16,125		7.45

	$ 20		59,000		43,175		7.26

			227,000		172,470

Compensation expenses related to options granted to consultants were recorded as follows:

	Three months ended September 30,				Period from inception through September 30,
	2008		2007		2008



Research and development expenses	$	4	$	116	$	1,513

General and administrative expenses		19		220		659

	$	23	$	336	$	2,172

F - 31

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 4: – SUBSEQUENT EVENTS

A.	On October 10, 2008, the Company entered into an investor relations agreement pursuant to which the service will be provided for a period of one month to the Company in consideration for a total payment of $5 and for the issuance of 20,000 shares of Common Stock of the Company.

On October 30, 2008, the Company’s Board of Directors resolved to grant to certain of the Company’s employees, management and directors options to purchase an aggregate of 590,000 shares of the Company’s common stock at an exercise price of $0.62 per share, which was based on the closing price of the Company’s stock as traded on the Nasdaq Capital Market on October 29, 2008. The grant will be made pursuant to an exemption from registration under section 4(2) of the Securities Act of 1933, as amended and is conditioned upon the approval by the Company’s shareholders of an increase of the pool of shares under the 2005 Stock Option Plan.

F - 32

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward – Looking Statements

This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other comparable terminology. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. Such forward-looking statements appear in this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and include statements regarding our expectations regarding our short – and long-term capital requirements, progress in our efforts to begin clinical trials and achieve regulatory approvals, our expected milestones in the next twelve months and our outlook for the coming months. The business and operations of Pluristem Therapeutics Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading “Risk Related to Our Business” in Part I, Item 1, “Description of Business” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2008. Readers are also urged to carefully review and consider the various disclosures we have made in that report.

Our financial statements are stated in thousands United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars.

As used in this quarterly report, the terms “we”, “us”, “our”, and “Pluristem” mean Pluristem Therapeutics Inc. and our wholly owned subsidiary, unless otherwise indicated or as otherwise required by the context.

Overview

We are engaged in the business of the development of stem cell production technology and the development and commercialization of cell therapy products. We were incorporated in the State of Nevada under the name “A.I. Software, Inc.” on May 11, 2001. On June 10, 2003, we acquired from the Weizmann Institute of Science and the Technion-Israel Institute of Technology 100% of the issued and outstanding shares of a research and development company based in Israel called Pluristem, Ltd. Pluristem, Ltd. was incorporated under the law of Israel on January 22, 2003 and has the facilities and personnel to conduct research and development in the field of stem cell research. As a result, Pluristem, Ltd. became our wholly owned subsidiary as of June 10, 2003.

On November 23, 2007, we changed our name to Pluristem Therapeutics Inc.

On November 26, 2007, we effected a one for two hundred reverse stock split. Accordingly, all references to number of shares, common stock and per share data have been adjusted to reflect the stock split on a retroactive basis.

On December 10, 2007, our shares of common stock began trading 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, our shares also began trading on the Frankfurt Stock Exchange, under the symbol PJT.

Effective on June 4, 2008, the authorized number of shares of our common stock was increased from 7,000,000 shares to 30,000,000 shares. Effective on July 1, 2008, we amended our Articles of Incorporation to authorize 10,000,000 shares of Preferred Stock, par value $0.00001, with such series, rights, preferences, privileges and restrictions as may be designated from time to time by the Board of Directors.

Going Concern

We have not generated revenues since inception. Historically we have relied on private placement issuances of equity and debt.

It is likely that we will need to raise additional working capital to fund our ongoing operations and growth. The amount of our future capital requirements depends primarily on the rate at which we increase our revenues and correspondingly decrease our use of cash to fund operations. Cash used for operations will be affected by numerous known and unknown risks and uncertainties including, but not limited to, our ability to successfully develop and commercialize our products and the degree to which competitive products and services are introduced to the market. As long as our cash flow from operations remains insufficient to completely fund operations, we will continue depleting our financial resources and seeking additional capital through equity and/or debt financing. If we raise additional capital through the issuance of debt, this will result in increased interest expense. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing stockholders will be reduced and those stockholders may experience significant dilution. In addition, new securities may contain rights, preferences or privileges that are senior to those of our common stock.

There can be no assurance that acceptable financing to fund our ongoing operations can be obtained on suitable terms, if at all. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders could lose their entire investment in our company.

RESULTS OF OPERATIONS – THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2007.

We have not generated any revenues, and we have negative cash flow from operations of $15,273,000 and have accumulated a deficit of $28,258,000 since our inception in May 2001. This negative cash flow is mostly attributable to research and development and general and administrative expenses. We anticipate that our operating expenses will increase as we intend to conduct detailed development of our products through animal pre-clinical trials and experiments and clinical trials. We estimate our operating cash expenses in the next twelve months to be approximately $6,000,000.

Research and Development

Research and development expenses net for the three months ended September 30, 2008 increased by 43% to $1,193,000 from $837,000 for the three months ended September 30, 2007. The increase is due to the increase in salary expenses and subcontractor expenses attributed to an increase in the number of employees and research activity as part of our progress towards clinical trials, and decrease in the participation by the Israeli Office of the Chief Scientist, deducted with the decrease in stock-based compensation to employees and consultants in the amount of $504,000 as a result of a decrease in our stock price.

General and Administrative

General and administrative expenses for the three months ended September 30, 2008 decreased by 36% to $1,003,000 from $1,557,000 for the three months ended September 30, 2007. The decrease in general and administrative expenses is primarily attributable to the decrease in stock-based compensation to employees and consultants which decreased from $938,000 to $381,000.

Financial Income, net

The decrease in financial income from $114,000 for the three months ended September 30, 2007 to an expense of $46,000 for the three months ended September 30, 2008, was mainly as a result of the loss from sale of marketable securities.

Net Loss

Net loss for the three months ended September 30, 2008 was $2,242,000, as compared to net loss of $2,280,000 for the three months ended September 30, 2007. Net loss per share for the three months ended September 30, 2008 was $0.29 as compared to $0.39 for the three months ended September 30, 2007. The net loss per share decreased as a result of the increase in our weighted average number of shares due to the issuance of additional shares in pursuant to a shelf registration statement, as discussed further below.

Liquidity and Capital Resources

As of September 30, 2008, total current assets were $2,661,000 and total current liabilities were $853,000. On September 30, 2008, we had a working capital surplus of $1,808,000 and an accumulated deficit of $28,258,000. We finance our operations and plan to continue doing so with stock issuances and with the participation of the Office of the Chief Scientist.

Cash and cash equivalents as of September 30, 2008 amounted to $1,978,000. This is an increase of $1,655,000 from the $323,000 reported as of June 30, 2008. We had no marketable securities on September 30, 2008 as opposed to marketable securities in the amount of $1,185,000 that we had as of June 30, 2008 and sold afterwards in light of volatile market conditions and the need for cash in the short-term. Cash balances increased in the three months ended September 30, 2008 for the reasons presented below:

Operating activities used cash of $1,805,000 in the three months ended September 30, 2008. Cash used by operating activities in the three months ended September 30, 2008 primarily consisted of payments of salaries to our employees, and payments of fees to our consultants, subcontractors and professional services providers.

Investing activities provided cash of $953,000 in the three months ended September 30, 2008. This resulted primarily from proceeds from sale of marketable securities in the amount of $1,113,000 deducted by costs associated with upgrading our facilities to Good Manufacturing Practice, or GMP, standard facilities in the amount of $183,000.

Financing activities generated cash amount of $2,507,000 during the three months ended September 30, 2008 resulting primarily from receiving cash from investors related to the August and September 2008 offerings described below.

On August 6, 2008, we sold 1,391,304 shares of our common stock and warrants to purchase 695,652 shares of Common Stock at an exercise price of $1.90 per share to two investors in consideration of $1,600,000 pursuant to terms of a securities purchase agreement. Rodman & Renshaw, LLC acted as placement agent, on a best efforts basis, for the offering and 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. Subject to FINRA Rule 2710, the placement agent warrants may be exercised after six months through and including August 5, 2013. The offering was made pursuant to our effective shelf registration statement on Form S-3 (File No. 333-151761).

On September 22, 2008, we sold 900,000 shares of our common stock and warrants to purchase 675,000 shares of Common Stock to an investor in consideration for $1,035,000 pursuant to terms of a securities purchase agreement. The price per share of Common Stock is $1.15, and the exercise price of the Warrants is $1.90. The Warrants will be exercisable for a period of five years. The offering was made pursuant to our effective shelf registration statement on Form S-3 (File No. 333-151761). As part of this transaction, we are obligated to pay a transaction fee to finders equal to 6% of the actual Purchase Price and 41,400 warrants exercisable for five-years at an exercise price of $1.50 per share to purchase 41,400 of our company’s shares of Common Stock.

We do not expect to generate any revenues from sales of products in the next twelve months. We may generate revenues from the sale of licenses to use our technology. Our products will likely not be ready for sale for at least three years, if at all.

In our management’s opinion, we expect to achieve the following events or milestones in the next twelve months in order for us to begin generating revenues as planned in three years or more:

—

Filing the IND (Investigation New Drug) package with the U.S. Food and Drug Administration, or FDA.

—

Scaling up of our 3-D PluriX^TM Bioreactor operations bringing them to commercial capabilities.

—

Start the first Phase I clinical trial with the PLX-PAD after the FDA approval, or the IND.

Outlook

We believe that the funds we have together with expected funds from the OCS will be sufficient for operating for at least two fiscal quarters. Management believes that we will need to raise additional funds before we have any cash flow from operations. To cut our expenses, effective on November 1, 2008 we have reduced the cash compensation of all management and directors by 10% for a period of six months. We plan to issue restricted stock to the management and directors to make up for such reduction. We believe that it will take several years for us to complete the approval process for our products in the United States or any other jurisdiction. In addition, future decisions regarding any acquisitions that we may choose to make or expanded product development, as to which there can be no assurance of success, will require additional capital, which must be raised through the issuance of additional securities and/or incurring debt. There can be no assurance, however, that acceptable financing to fund our ongoing operations can be obtained on suitable terms, if at all. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders could lose their entire investment in our company.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials. Critical and significant accounting policies are described in our latest audited financial statements and such policies have not changed materially.

Off Balance Sheet Arrangements

Our company has no off balance sheet arrangements that are not disclosed in our annual report on Form 10-K as filed with the U.S. Securities and Exchange Commission on September 29, 2008.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures – We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our Securities and Exchange Commission, or SEC, reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO and our CFO, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting – There has been no change in our internal control over financial reporting during the first quarter of fiscal 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In July 2008, we issued 40,000 shares of common stock to a service provider as compensation for carrying out investor relations activities.

In August 2008, we granted to certain of our employees and directors options to purchase an aggregate of 97,500 of our shares of common stock at an exercise price of $1.04 per share under the 2005 Stock Option Plan.

On September 1, 2008, we entered into a consulting agreement pursuant to which we granted the consultant fully vested warrants to purchase 15,000 shares of our common stock effective upon signing the contract. All warrants are exercisable for 5 years at an exercise price of $1.91 per share.

In October 2008, we issued 750 shares of common stock to an investor relations consultant in consideration for $1,875.

In October 2008 we issued 1,500 shares of our common stock to a consultant as compensation for carrying out investor relations activities.

All of the above issuances and sales were exempt under Regulation S and/or Regulation D under the Act and/or Section 4(2) of the Securities Act of 1933, as amended (the “Act”).

On October 30, 2008, our board of directors resolved to grant to certain of our employees, management and directors options to purchase an aggregate of 590,000 shares of our common stock at an exercise price of $0.62 per share, which was based on the closing price of our stock as traded on the Nasdaq Capital Market on October 29, 2008. The grant will be made pursuant to an exemption from registration under section 4(2) of the Act and is conditioned upon the approval by our shareholders of an increase of the pool of shares under our 2005 Stock Option Plan.

Item 5. Other Information.

In an effort to reduce our expenses, effective on November 1, 2008 we have reduced the cash compensation of all management and directors by 10% for a period of six months. We plan to issue restricted stock to the management and directors to make up for such reduction.

On October 31, 2008, our consulting agreement with Shai Meretzki expired and as a result, Dr. Meretzki no longer serves as our Chief Technology Officer and is no longer an executive officer of our company.

Item 6. Exhibits.

31.1*

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Zami Aberman

31.2*

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Yaky Yanay

32.1**

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Filed herewith.

**Furnished herewith.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PLURISTEM THERAPEUTICS INC.

By: /s/ Zami Aberman
——————————————
Zami Aberman, Chief Executive Officer
(Principal Executive Officer)
Date: November 5, 2008

By: /s/ Yaky Yanay
——————————————
Yaky Yanay, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Date: November 5, 2008

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Form 10-Q

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2008

(Unaudited)

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2008

U.S. DOLLARS IN THOUSANDS

(Unaudited)

INDEX

NOTE 1: – GENERAL

NOTE 2: – SIGNIFICANT ACCOUNTING POLICIES

NOTE 3: – SHARE CAPITAL AND STOCK OPTIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

NOTE 4: – SUBSEQUENT EVENTS

Forward – Looking Statements

Research and Development

General and Administrative

Financial Income, net

Net Loss

Liquidity and Capital Resources

Outlook

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Item 4T. Controls and Procedures.

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 5. Other Information.

Item 6. Exhibits.

SIGNATURES

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549