What changed in this filing

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Item 1. Financial Statements

2020-05-11 compared with 2020-02-06 · 649 added, 565 removed, 474 unchanged (72% of the section changed)

Financial Statements.

THERAPEUTICS INC.

AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2019

THERAPEUTICS INC.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

As of March 31, 2020

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2019

INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

As of March 31, 2020

DOLLARS IN THOUSANDS

22 unchanged sentences

Total long-term assets

accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

The accompanying notes are an integral part

of the unaudited interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

19 unchanged sentences

Common stock $0.00001 par value per share:

30,000,000 shares Issued and outstanding:

16,934,417 shares as of December 31, 2019,

15,082,852 shares as of June 30, 2019

30,000,000 shares Issued

and outstanding:

18,673,173 shares as of March 31, 2020, 15,082,852 shares as of June 30, 2019

Additional paid-in capital

2 unchanged sentences

Total liabilities and stockholders’

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial

(*) Less than $1

The accompanying notes are an integral part

of the unaudited interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

3 unchanged sentences

Dollars in thousands (except share and per share data)

Six months ended

Nine months ended

Three months ended

11 unchanged sentences

Weighted average number of shares used in computing basic and diluted net loss per share

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial

The accompanying notes are an integral part of the unaudited

interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

3 unchanged sentences

Dollars in thousands (except share and per share data)

Additional Paid-in

Total Stockholders’

3 unchanged sentences

Exercise of options by employees and non-employee consultants

Balance as of December 31, 2018 (unaudited)

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial

Balance as of March 31, 2019 (unaudited)

(*) Less than $1

The accompanying notes are an integral part of the unaudited

interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

5 unchanged sentences

Total Stockholders’

Balance as of October 1, 2018

Balance as of January 1, 2019

Stock-based compensation to employees, directors and non-employee consultants

Issuance of common stock under At Market Issuance Sales Agreement, net of issuance costs of $209 (see Note 5a)

Exercise of options by employees and non-employee consultants

Balance as of December 31, 2018 (unaudited)

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial

as of March 31, 2019 (unaudited)

(*) Less than $1

The accompanying notes are an integral part of the unaudited

interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

10 unchanged sentences

Round up of shares due to reverse stock split effectuated on July 25, 2019 (see Note 1c)

Balance as of December 31, 2019 (unaudited)

as of March 31, 2020 (unaudited)

(*) Less than $1

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial

The accompanying notes are an integral part of the unaudited

interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

3 unchanged sentences

Dollars in thousands (except share and per share data)

Stockholders’

as of October 1, 2019

compensation to employees, directors and non-employee consultants

of common stock under Open Market Sales Agreement, net of issuance costs of $614 (see Note 6b)

of options by employees and non-employee consultants

Balance as of December 31, 2019

Additional Paid-in

Total Stockholders’

Balance as of January 1, 2020

Stock-based compensation to employees, directors and non-employee consultants

Issuance of common stock under Open Market Sales Agreement, net of issuance costs of $792 (see Note 5b)

Exercise of options by employees and non-employee consultants

Balance as of March 31, 2020

(*) Less than $1

accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

The accompanying notes are an integral part of the unaudited

interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

3 unchanged sentences

Dollars in thousands

Six months ended

Nine months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Net cash provided by investing activities

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial

The accompanying notes are an integral part of the unaudited

interim condensed consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

3 unchanged sentences

Dollars in thousands

Six months ended

Nine months ended

CASH FLOWS FROM FINANCING ACTIVITIES:

11 unchanged sentences

Purchase of property and equipment on credit

following table provides a reconciliation of cash and cash equivalents, and long term restricted cash reported within the consolidated

balance sheets that sum to the total of such amounts in the consolidated statements of cash flows:

The following table provides a reconciliation

of cash and cash equivalents, and long term restricted cash reported within the consolidated balance sheets that sum to the total

of such amounts in the consolidated statements of cash flows:

Cash and cash equivalents

5 unchanged sentences

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 1:-GENERAL

Pluristem Therapeutics Inc., a Nevada corporation (“Pluristem

Therapeutics”), was incorporated on May 11, 2001.

Pluristem Therapeutics Inc., a Nevada corporation (“Pluristem Therapeutics”),

was incorporated on May 11, 2001.

Pluristem Therapeutics has a wholly owned subsidiary, Pluristem Ltd.

“Subsidiary”), which is incorporated under the laws of the State of Israel.

Pluristem Therapeutics and the Subsidiary

are referred to as the “Company”

(the “Subsidiary”),

which is incorporated under the laws of the State of Israel.

In January 2020, the Subsidiary established a fully owned subsidiary,

Pluristem GMBH (the “German Subsidiary”) which is incorporated under the laws of Germany.

Pluristem Therapeutics and

the Subsidiary and the German Subsidiary are referred to as the “Company”

or “Pluristem”.

In January 2020, subsequent to the period end, the Subsidiary

established a fully owned subsidiary, Pluristem GMBH (the “German Subsidiary”) which is incorporated under the laws

The Company’s

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under the symbol “PLTR”.

The Company is a bio-therapeutics company developing placenta-based

cell therapy product candidates for the treatment of multiple ischemic, inflammatory and hematologic conditions.

The Company has

incurred an accumulated deficit of approximately $264,513 and incurred recurring operating losses and negative cash flows from

The Company is a bio-therapeutics company developing placenta-based cell

therapy product candidates for the treatment of multiple ischemic, inflammatory and hematologic conditions.

The Company has also

initiated a compassionate use program in the U.S.

and Israel for the treatment of complications associated with COVID-19.

has incurred an accumulated deficit of approximately $272,020 and incurred recurring operating losses and negative cash flows from

operating activities since inception.

As of December 31, 2019, the Company’s total stockholders’

As of March 31, 2020, the Company’s total stockholders’

equity amounted to $14,169.

the six-month period ended December 31, 2019, the Company incurred operating losses of $13,563 and its negative cash flow from

operating activities was $13,542.

The Company will be required to identify additional liquidity resources in the near term in

order to support the commercialization of its products and maintain its research and development and clinical trials activities.

As of December

31, 2019, the Company’s cash position (cash and cash equivalents, short-term bank deposits and restricted cash and long-term

bank deposits) totaled approximately $17,060.

The Company is addressing its liquidity issues by implementing initiatives to allow

the continuation of its activities.

The Company’s current operating plan includes various assumptions concerning the level

and timing of cash outflows for operating activities and capital expenditures.

The Company’s ability to successfully carry

out its business plan, which includes a cost-reduction plan should it be unable to raise sufficient additional capital, is primarily

dependent upon its ability to (1) obtain sufficient additional capital, (2) enter into license agreements to use or commercialize

the Company’s products and (3) receive other sources of funding, including non-diluting sources such as the Israeli Innovation

Authority (the “IIA”) grants, the European Union’s Horizon 2020 program (“Horizon 2020”) grants

and other grants.

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 products.

to management estimates, liquidity resources as of December 31, 2019, together with the funds received under the Open Market Sales

Agreement SM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”), as agent, during January

2020, will be sufficient to maintain the Company’s operations into the second quarter of the Company’s fiscal year

The Company’s inability to raise funds to carry out its business plan will have a severe negative impact on its ability

to remain a viable company.

31, 2020, the Company’s cash position (cash and cash equivalents, short-term bank deposits and restricted cash and long-term bank

deposits) totaled approximately $15,881.

The Company plans to continue to finance its operations with sales of equity securities,

entering into licensing agreements, the proceeds from the loan by the European Investment Bank (the “EIB”) once certain

milestones are reached, and from grants to support its research and development activities.

Management believes that these funds,

together with its existing operating plan, are sufficient for the Company to meet its obligations as they come due at least for

a period of twelve months from the date of the interim condensed consolidated financial statements.

In the longer term, the Company

plans to finance its operations from revenues from the sales of its future products.

CHA Agreement

June 26, 2013, Pluristem entered into an exclusive license and commercialization agreement (the “CHA Agreement”) with

CHA Biotech Co.

(“CHA”), for conducting clinical trials and commercialization of Pluristem’s PLX-PAD product

in South Korea in connection with two indications:

the treatment of Critical Limb Ischemia (“CLI”), and Intermediate

Claudication (collectively with CLI, the “Indications”).

Under the terms of the CHA Agreement, CHA will receive exclusive

rights in South Korea for conducting clinical trials with respect to the Indications and the Company will continue to retain

rights to its proprietary manufacturing technology and cell-related intellectual property.

The first clinical study as

part of the CHA Agreement was a Phase II trial in Intermittent Claudication.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 1:- GENERAL (CONT.)

26, 2013, Pluristem entered into an exclusive license and commercialization agreement (the “CHA Agreement”) with CHA

(“CHA”), for conducting clinical trials and commercialization of Pluristem’s PLX-PAD product in South

Korea in connection with two indications:

the treatment of Critical Limb Ischemia (“CLI”), and Intermediate Claudication

(collectively with CLI, the “Indications”).

Under the terms of the CHA Agreement, CHA will receive exclusive rights

in South Korea for conducting clinical trials with respect to the Indications and the Company will continue to retain rights

to its proprietary manufacturing technology and cell-related intellectual property.

The first clinical study as part of the CHA

Agreement was a Phase II trial in Intermittent Claudication.

Upon the first regulatory

5 unchanged sentences

plan for conducting the clinical trials.

Upon termination of the CHA Agreement, the license granted thereunder will terminate

and all rights included therein will revert to the Company, and the Company will be free to enter into agreements with any other

third parties for the granting of a license in or outside South Korea or to deal in any other manner with such rights as it shall

see fit at its sole discretion.

Upon termination of the CHA Agreement, the license granted thereunder will terminate and

all rights included therein will revert to the Company, and the Company will be free to enter into agreements with any other third

parties for the granting of a license in or outside South Korea or to deal in any other manner with such rights as it shall see

fit at its sole discretion.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 1:-GENERAL (CONT.)

Chart Industries Agreement

8 unchanged sentences

first commercial sale of the thawing device.

As of December 31, 2019, commercial sale of the thawing device by Chart has not yet

As of March 31, 2020, commercial sale of the thawing device by Chart has not yet begun.

Reverse stock split

1 unchanged sentence

Directors approved a 1-for-10 reverse stock split of the Company’s (a) authorized shares of common stock;

(b) issued and

outstanding shares of common stock and (c) authorized shares of preferred stock.

(b) issued and outstanding

shares of common stock and (c) authorized shares of preferred stock.

The reverse stock split became effective on July 25, 2019.

All shares of common stock, options, warrants and securities convertible or exercisable into shares of common stock,

as well as loss per share, have been adjusted to give retroactive effect to this reverse stock split for all periods presented.

All shares of common stock, options, warrants and securities convertible or exercisable into shares of common stock, as well as

loss per share, have been adjusted to give retroactive effect to this reverse stock split for all periods presented.

An additional 1,292 shares

1 unchanged sentence

whole shares as a result of the reverse stock split.

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2:-SIGNIFICANT

ACCOUNTING POLICIES

Unaudited Interim Financial Information

3 unchanged sentences

(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S.

Securities and Exchange Commission Regulation S-X.

Accordingly, they do not include all the information and footnotes required

by GAAP for complete financial statements.

In the opinion of management, all adjustments considered necessary for a fair presentation

have been included (consisting only of normal recurring adjustments except as otherwise discussed).

and Exchange Commission Regulation S-X.

Accordingly, they do not include all the information and footnotes required by GAAP for

complete financial statements.

In the opinion of management, all adjustments considered necessary for a fair presentation have

been included (consisting only of normal recurring adjustments except as otherwise discussed).

information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual

Report on Form 10-K for the year ended June 30, 2019.

results for the three and nine month periods ended March 31, 2020 are not necessarily indicative of the results that may be expected

for the year ending June 30, 2020.

Significant Accounting Policies

The significant accounting

policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those

applied in the preparation of the latest annual financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

1 unchanged sentence

ACCOUNTING POLICIES (CONT.)

further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s

Annual Report on Form 10-K for the year ended June 30, 2019.

results for the six month period ended December 31, 2019 are not necessarily indicative of the results that may be expected for

the year ending June 30, 2020.

Significant Accounting Policies

The significant accounting

policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those

applied in the preparation of the latest annual financial statements.

Use of estimates

preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates,

judgments and assumptions that are reasonable based upon information available at the time they are made.

These estimates, judgments

and assumptions can affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ

from those estimates.

The preparation

of financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments

and assumptions that are reasonable based upon information available at the time they are made.

These estimates, judgments and

assumptions can affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from

those estimates.

Fair value of financial instruments

carrying amounts of the Company’s financial instruments, including cash and cash equivalents, short-term and restricted

bank deposits, accounts receivable and other current assets, trade payable and other accounts payable, accrued expenses and other

liabilities, approximate fair value because of their generally short term maturities.

Company measures its investments in marketable securities and derivative instruments at fair value under Accounting Standards

Codification (“ASC”), “Fair Value Measurements and Disclosures”

amounts of the Company’s financial instruments, including cash and cash equivalents, short-term and restricted bank deposits, accounts

receivable and other current assets, trade payable and other accounts payable, accrued expenses and other liabilities, approximate

fair value because of their generally short term maturities.

measures its investments in marketable securities and derivative instruments at fair value under Accounting Standards Codification

(“ASC”), “Fair Value Measurements and Disclosures”

(“ASC 820”).

Fair value is

an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions

that market participants would use in pricing an asset or a liability.

As a basis for considering such assumptions, ASC 820 establishes

a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Fair value is an exit price,

representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions that market

participants would use in pricing an asset or a liability.

As a basis for considering such assumptions, ASC 820 establishes a three-tier

value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

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3 - Unobservable inputs for the asset or liability.

fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs

when measuring fair value.

value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when

measuring fair value.

The Company categorized each of its fair value measurements in one of these three levels of hierarchy.

Derivative financial

The Company accounts for derivatives

and hedging based on ASC 815, “Derivatives and hedging”

(“ASC 815”), as amended and related interpretations.

Derivative financial instruments

accounts for derivatives and hedging based on ASC 815, “Derivatives and hedging”

(“ASC 815”), as amended

and related interpretations.

ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value.

If a derivative

meets the definition of a hedge and is so designated, depending on the nature of the hedge, changes in the fair value of the derivative

will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings

(for fair value hedge transactions) or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings

(for cash flow hedge transactions).

If a derivative

does not meet the definition of a hedge, the changes in the fair value are included in earnings.

Cash flows related to such hedges

are classified as operating activities.

enters into forward exchange contracts and option contracts in order to limit the exposure to exchange rate fluctuation associated

with expenses mainly incurred in New Israeli Shekels (“NIS”).

Since the derivative instruments that the Company holds

do not meet the definition of hedging instruments under ASC 815, any gain or loss derived from such instruments is recognized immediately

as “financial income, net”.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

1 unchanged sentence

ACCOUNTING POLICIES (CONT.)

If a derivative meets the definition

of a hedge and is so designated, depending on the nature of the hedge, changes in the fair value of the derivative will either

be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings (for fair value

hedge transactions) or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings (for cash

flow hedge transactions).

If a derivative does not meet

the definition of a hedge, the changes in the fair value are included in earnings.

Cash flows related to such hedges are classified

as operating activities.

The Company enters into forward

exchange contracts and option contracts in order to limit the exposure to exchange rate fluctuation associated with expenses mainly

incurred in New Israeli Shekels (“NIS”).

Since the derivative instruments that the Company holds do not meet the definition

of hedging instruments under ASC 815, any gain or loss derived from such instruments is recognized immediately as “financial

income, net”.

The Company measured the fair

value of the contracts in accordance with ASC 820.

Foreign currency derivative contracts are classified within Level 2 as the

valuation inputs are based on quoted prices and market observable data of similar instruments.

As of December 31, 2019, the

fair value of the options contracts was $23, and is presented in “other current assets”.

The net income

(expense) recognized in “Financial income (expense), net”

during the three and six month periods ended December 31,

2019 and 2018 were ($26), $57 and ($492), ($405), respectively.

Foreign currency derivative contracts are classified within Level 2 as the valuation

inputs are based on quoted prices and market observable data of similar instruments.

As of March 31, 2020, the fair

value of the options contracts was ($54) and is presented in “other accounts payable”.

The net income (expense) recognized

in “Financial income (expense), net”

during the three and nine month periods ended March 31, 2020 and 2019 were ($132),

($75) and $283, ($122), respectively.

Recently Adopted Accounting Pronouncements

Accounting Standards Update

(“ASU”) No.

Standards Update (“ASU”) No.

2016-02 - “Leases”

(“Topic 842”) and ASU No.

2018-11, “Targeted Improvements

- Leases (Topic 842):

In February 2016 and July 2018,

the Financial Accounting Standards Board (“FASB”) issued guidance on the recognition, measurement, presentation and

disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a

dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is

effectively a financed purchase by the lessee.

This classification will determine whether a lease expense is recognized based

on an effective interest method or on a straight-line basis over the term of the lease, respectively.

A lessee is also required

to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their

classification.

Leases with a term of 12 months or less will be accounted for in a manner similar to the accounting treatment

requirements under existing guidance for operating leases today.

The new standard requires lessors to account for leases using

an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating

Topic 842 supersedes the previous leases standard, ASC 840, “Leases”.

The guidance is effective for annual

periods beginning on or after December 15, 2018, or July 1, 2019 for the Company, and interim periods within those fiscal years

with early adoption permitted.

Early adoption is permitted.

The provisions of ASU 2016-02 are to be applied using a modified retrospective

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT

ACCOUNTING POLICIES (CONT.)

2018-11, “Targeted

Improvements - Leases (Topic 842):

In February 2016 and July 2018, the Financial Accounting

Standards Board (“FASB”) issued guidance on the recognition, measurement, presentation and disclosure of leases for

both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach, classifying

leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase

by the lessee.

This classification will determine whether a lease expense is recognized based on an effective interest method or

on a straight-line basis over the term of the lease, respectively.

A lessee is also required to record a right-of-use asset and

a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term of

12 months or less will be accounted for in a manner similar to the accounting treatment requirements under existing guidance for

operating leases today.

The new standard requires lessors to account for leases using an approach that is substantially equivalent

to existing guidance for sales-type leases, direct financing leases and operating leases.

Topic 842 supersedes the previous leases

standard, ASC 840, “Leases”.

The guidance is effective for annual periods beginning on or after December 15, 2018,

or July 1, 2019 for the Company, and interim periods within those fiscal years with early adoption permitted.

Early adoption is

The provisions of ASU 2016-02 are to be applied using a modified retrospective approach.

The Company adopted the new

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of $240 and $381 in current and long-term liabilities in the Company’s consolidated balance sheets, respectively.

Additionally, the Company

included in its balance sheet, at adoption, operating right-of-use assets, short-term operating lease liabilities and long-term

operating lease liabilities of $1,631, $964 and $1,261, respectively.

The standard had no material impact on the Company’s

net loss or its cash flows.

Additionally, the Company included

in its balance sheet, at adoption, operating right-of-use assets, short-term operating lease liabilities and long-term operating

lease liabilities of $1,631, $964 and $1,261, respectively.

The standard had no material impact on the Company’s net loss or its

For additional information regarding the Company’s accounting for leases, please refer to Note 3.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT

ACCOUNTING POLICIES (CONT.)

2018-07 - “Compensation—Stock Compensation”

3 unchanged sentences

The ASU expands the scope of ASU No.

2018-07 to include share-based payment transactions for acquiring goods

and services from nonemployees.

2018-07 to include share-based payment transactions for acquiring goods and

services from nonemployees.

An entity should apply ASU No.

2018-07 to nonemployee awards except with respect to option pricing

models and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of

cost recognition over that period).

models and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost

recognition over that period).

The amendments specify that ASU No.

2018-07 applies to all share-based payment transactions

in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based

payment awards.

2018-07 is effective for fiscal years beginning after December 15, 2018, or July 1, 2019 for the Company,

and interim periods within those fiscal years with early adoption permitted.

The Company adopted the new standard as of July 1,

2019, and the new standard had no material impact on its consolidated financial statements.

2018-07 applies to all share-based payment transactions in which

a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment

2018-07 is effective for fiscal years beginning after December 15, 2018, or July 1, 2019 for the Company, and interim

periods within those fiscal years with early adoption permitted.

The Company adopted the new standard as of July 1, 2019, and the

new standard had no material impact on its consolidated financial statements.

2017-12 - “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities”

11 unchanged sentences

fiscal years beginning after December 15, 2018, or July 1, 2019, for the Company.

The standard had no impact on the Company’s

consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT

ACCOUNTING POLICIES (CONT.)

The standard had no impact on the Company’s consolidated

financial statements.

Recently Issued Accounting Pronouncements

8 unchanged sentences

arrangement participant that are not accounted for under Topic 606.

ASU 2018-18 is effective for fiscal years beginning after

December 15, 2019, or July 1, 2020 for the Company.

The Company is currently evaluating the impact of adopting the ASU on its

ASU 2018-18 is effective for fiscal years beginning after December

15, 2019, or July 1, 2020 for the Company.

The Company is currently evaluating the impact of adopting the ASU on its consolidated

financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 3:- LEASES

1 unchanged sentence

lease liability are initially measured at the present value of the lease payments, discounted using the interest rate implicit

in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate based on the information

available at the date of adoption in determining the present value of the lease payments.

The Company’s incremental borrowing

rate is estimated to approximate the interest rate on similar terms and payments and in economic environments where the leased

asset is located.

in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate based on the information available

at the date of adoption in determining the present value of the lease payments.

The Company’s incremental borrowing rate is estimated

to approximate the interest rate on similar terms and payments and in economic environments where the leased asset is located.

The Company has various operating leases for office

1 unchanged sentence

Below is a summary of our operating right-of-use assets and operating lease liabilities

as of December 31, 2019:

as of March 31, 2020:

Operating right-of-use assets

6 unchanged sentences

Minimum lease payments for our right of use assets

over the remaining lease periods as of December 31, 2019 are as follows:

over the remaining lease periods as of March 31, 2020 are as follows:

Total undiscounted lease payments

2 unchanged sentences

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

1 unchanged sentence

The components of lease expense and supplemental cash

flow information related to leases for the six months ended December 31, 2019 were as follows:

Six months ended

flow information related to leases for the nine months ended March 31, 2020 were as follows:

Nine months ended

Three months ended

Components of lease expense

Operating lease cost

Sublease income

Supplemental cash flow information

Cash paid for amounts included in the measurement of lease liabilities

Sublease income

As of December 31, 2019, the weighted average remaining

Supplemental non-cash information related to lease liabilities arising from obtaining ROU assets

As of March 31, 2020, the weighted average remaining

lease term is 2.0 years, and the weighted average discount rate is 10 percent.

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collateralized borrowing rate of the Company, adjusted to the specific lease term and location of each lease.

NOTE 4:- COMMITMENTS AND CONTINGENCIES

As of December 31, 2019, an amount of $971 of cash and

deposits was pledged by the Subsidiary to secure the derivatives and hedging transactions, credit line and bank guarantees.

Under the Law for the Encouragement of Industrial Research

and Development, 1984, (the “Research Law”), research and development programs that meet specified criteria and are

approved by the IIA are eligible for grants of up to 50% of the project’s expenditures, as determined by the research committee,

in exchange for the payment of royalties from the sale of products developed under the program.

- COMMITMENTS AND CONTINGENCIES

As of March 31, 2020, an amount of $1,073 of cash and deposits was pledged by the Subsidiary to

secure the derivatives and hedging transactions, credit line and bank guarantees.

Under the Law for the Encouragement of Industrial Research and Development, 1984, (the “Research

Law”), research and development programs that meet specified criteria and are approved by the IIA are eligible for grants

of up to 50% of the project’s expenditures, as determined by the research committee, in exchange for the payment of royalties

from the sale of products developed under the program.

Regulations under the Research

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Following the full repayment of the grant, there is no further liability for royalties.

Through March 31, 2020, total

grants obtained from the IIA aggregated to approximately $27,685 and total royalties paid and accrued amounted to $170.

31, 2020, the Company’s contingent liability in respect to royalties to the IIA amounted to $27,515, not including LIBOR interest

as described above.

The Company was awarded a marketing grant under the “Smart Money”

program of approximately $112 from the Israeli Ministry of Economy and Industry.

The program’s aim is to assist companies

to extend their activities in international markets.

The goal market that was chosen was Japan.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 4:- COMMITMENTS AND CONTINGENCIES

Through December 31, 2019,

total grants obtained from the IIA aggregated to approximately $27,685 and total royalties paid and accrued amounted to $170.

As of December 31, 2019, the Company’s contingent liability in respect to royalties to the IIA amounted to $27,515, not

including LIBOR interest as described above.

The Company was awarded

a marketing grant under the “Smart Money”

program of approximately $112 from the Israeli Ministry of Economy and Industry.

The program’s aim is to assist companies to extend their activities in international markets.

The goal market that was chosen

- COMMITMENTS AND CONTINGENCIES

Israeli government granted the Company budget resources that are intended to be used to advance the Company’s product candidate

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of expenses under the program and will be spread for a period of up to 5 years or until the amount of the grant is fully paid .

As of December 31, 2019, total

As of March 31, 2020, total

grants obtained under this Smart Money program amounted to approximately $112.

As of December 31, 2019, the Company’s contingent

liability with respect to royalties for this “Smart Money”

As of March 31, 2020, the Company’s contingent liability

with respect to royalties for this “Smart Money”

program was $112 and no royalties were paid or accrued.

The Company was awarded an additional “Smart Money”

grant of approximately $229 from Israel’s Ministry of Economy and Industry to facilitate certain marketing and business

development activities with respect to its advanced cell therapy products in the Chinese market, including Hong Kong.

government granted the Company budget resources that are intended to be used to advance the Company’s product candidate

towards marketing in the China-Hong Kong markets.

Company will also receive close support from Israel’s trade representatives stationed in China, including Hong Kong, along

with experts appointed by the Smart Money program.

As part of the program, the Company will repay royalties of 5% from the Company’s

revenues in the region for a five year period, beginning the year in which the Company will not be entitled to reimbursement of

expenses under the program and will be spread for a period of up to 5 years or until the amount of the grant is fully paid .

As of December 31, 2019, the

aggregate amount of grant obtained from this Smart Money program was approximately $102.

As of December 31, 2019, the Company’s

contingent liability with respect to royalties for this “Smart Money”

program is $102 and no royalties were paid or

In September 2017, the Company signed an agreement with

the Tel-Aviv Sourasky Medical Center (Ichilov Hospital) to conduct a Phase I/II trial of PLX-PAD cell therapy for the treatment

of Steroid-Refractory Chronic Graft-Versus-Host-Disease (“GvHD”).

grant of approximately $229 from

Israel’s Ministry of Economy and Industry to facilitate certain marketing and business development activities with respect

to its advanced cell therapy products in the Chinese market, including Hong Kong.

The Israeli government granted the Company budget

resources that are intended to be used to advance the Company’s product candidate towards marketing in the China-Hong Kong

The Company will also receive

close support from Israel’s trade representatives stationed in China, including Hong Kong, along with experts appointed by

the Smart Money program.

part of the program, the Company will repay royalties of 5% from the Company’s revenues in the region for a five year period,

beginning the year in which the Company will not be entitled to reimbursement of expenses under the program and will be spread

for a period of up to 5 years or until the amount of the grant is fully paid .

As of March 31, 2020, the aggregate

amount of grant obtained from this Smart Money program was approximately $102.

As of March 31, 2020, the Company’s contingent liability

with respect to royalties for this “Smart Money”

program is $102 and no royalties were paid or accrued.

In September 2017, the Company signed an agreement with the Tel-Aviv Sourasky Medical Center (Ichilov

Hospital) to conduct a Phase I/II trial of PLX-PAD cell therapy for the treatment of Steroid-Refractory Chronic Graft-Versus-Host-Disease

(“GvHD”).

As part of the agreement with

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product relating to GvHD, with a maximum aggregate royalty amount of approximately $250.

The Company was awarded a marketing

grant of approximately $52 under the “Shalav”

program of the Israeli Ministry

of Economy and Industry.

The grant is intended to facilitate certain marketing and business

development activities with respect to the Company’s advanced cell therapy products

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 4:- COMMITMENTS AND CONTINGENCIES

The Company was awarded a marketing grant of approximately $52 under the “Shalav”

of the Israeli Ministry of Economy and Industry.

The grant is intended to facilitate certain marketing and business development

activities with respect to the Company’s advanced cell therapy products in the U.S.

As part of the program, the

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Price Index, is fully paid.

As of December 31, 2019, total

As of March 31, 2020, total

grants obtained under the “Shalav”

program amounted to approximately $49.

As of December 31, 2019, the Company’s

contingent liability with respect to royalties for this “Shalav”

As of March 31, 2020, the Company’s contingent

liability with respect to royalties for this “Shalav”

program was $49 and no royalties were paid or accrued.

NOTE 5:- STOCKHOLDERS’

Pursuant to a shelf registration on Form S-3 declared effective

by the Securities and Exchange Commission on June 23, 2017 (the “Form S-3”), in July 2017 the Company entered into

an At Market Issuance Sales Agreement (“ATM Agreement”) with FBR Capital Markets & Co., MLV & Co.

Oppenheimer & Co.

(collectively, the “Agents”), which provides that, upon the terms and subject to the conditions

and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell shares of common stock having

an aggregate offering price of up to $80,000 through the Agents acting as sales agent.

During the six month period ended December

31, 2018, the Company sold 170,600 shares of common stock under the ATM Agreement at an average price of $12.30 per share for

aggregate net proceeds of approximately $1,952, net of issuance expenses of $148.

On February 4, 2019, the Company notified the

Agents of the termination of the ATM Agreement.

Pursuant to the Form S-3,

on February 6, 2019 the Company entered into the Sales Agreement with Jefferies which provides that, upon the terms and subject

to the conditions and limitations in the Sales Agreement, the Company may elect, from time to time, to offer and sell shares of

common stock having an aggregate offering price of up to $50,000 through Jefferies acting as sales agent.

During the six month

period ended December 31, 2019, the Company sold 1,644,118 shares of common stock under the Sales Agreement at an average price

of $4.12 per share for aggregate net proceeds of approximately $5,967, net of issuance expenses of $812.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 5:- STOCKHOLDERS’

- STOCKHOLDERS’

Pursuant to a shelf registration on Form S-3 declared effective by the Securities and Exchange

Commission on June 23, 2017, in July 2017 the Company entered into an At Market Issuance Sales Agreement (“ATM Agreement”)

with FBR Capital Markets & Co., MLV & Co.

LLC and Oppenheimer & Co.

(collectively, the “Agents”),

which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect,

from time to time, to offer and sell shares of common stock having an aggregate offering price of up to $80,000 through the Agents

acting as sales agent.

During the nine month period ended March 31, 2019, the Company sold 170,600 shares of common stock under

the ATM Agreement at an average price of $12.30 per share for aggregate net proceeds of approximately $1,952, net of issuance expenses

On February 4, 2019, the Company

notified the Agents of the termination of the ATM Agreement.

Pursuant to a shelf registration on Form S-3, on February 6, 2019, the Company entered into the

Open Market Sales Agreement SM (the “Sales Agreement”) with Jefferies which provides that, upon the terms

and subject to the conditions and limitations in the Sales Agreement, the Company may elect, from time to time, to offer and sell

shares of common stock having an aggregate offering price of up to $50,000 through Jefferies acting as sales agent.

nine month period ended March 31, 2019, the Company sold 201,800 shares of common stock under the Sales Agreement at an average

price of $9.70 per share for aggregate net proceeds of approximately $1,758, net of issuance expenses of $209.

During the nine

month period ended March 31, 2020, the Company sold 3,319,898 shares of common stock under the Sales Agreement at an average price

of $3.91 per share for aggregate net proceeds of approximately $11,362, net of issuance expenses of $1,604.

Options to non-employees:

the options to non-employee consultants under its 2005 and 2016 incentive option plans is as follows:

Six months ended December 31, 2019 (Unaudited)

Exercise Price

Nine months ended March 31, 2020 (Unaudited)

Weighted Average Exercise Price

Weighted Average Remaining Contractual Terms (in years)

Aggregate Intrinsic Value Price

Options outstanding at beginning of period

5 unchanged sentences

Options vested and expected to vest

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

Six months ended

Three months ended

Research and development expenses

General and administrative expenses

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 5:- STOCKHOLDERS’

- STOCKHOLDERS’

EQUITY (CONT.)

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

Nine months ended

Three months ended

Research and development expenses

General and administrative expenses

Restricted stock (“RS”) and restricted stock

3 unchanged sentences

table summarizes the activity related to unvested RS and RSUs granted to employees and directors under the Company’s 2005

and 2016 incentive option plans for the six month period ended December 31, 2019 (Unaudited):

and 2016 incentive option plans for the nine month period ended March 31, 2020 (Unaudited):

Unvested at the beginning of period

Unvested at the end of the period

Expected to vest after December 31, 2019

Expected to vest after March 31, 2020

expenses related to RS and RSUs granted to employees and directors were recorded as follows:

Six months ended

Nine months ended

Three months ended

1 unchanged sentence

General and administrative expenses

Unamortized compensation expenses

related to RSUs granted to employees and directors to be recognized over an average time of approximately 3.25 years are approximately

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 5:- STOCKHOLDERS’

- STOCKHOLDERS’

EQUITY (CONT.)

Unamortized compensation expenses

related to RSUs granted to employees and directors to be recognized over an average time of approximately 3 years are approximately

RS and RSUs to employees, directors and consultants

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table summarizes the activity related to unvested RS and RSUs granted to consultants under the Company’s 2005 and 2016 incentive

option plans for the six month period ended December 31, 2019 (Unaudited):

option plans for the nine month period ended March 31, 2020 (Unaudited):

Unvested at the beginning of period

1 unchanged sentence

expenses related to RS and RSUs granted to consultants were recorded as follows:

Six months ended

Nine months ended

Three months ended

1 unchanged sentence

General and administrative expenses

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 6:-SUBSEQUENT EVENTS

From January 1, 2020 through February 6, 2020, the Company

sold an aggregate of 925,480 shares of common stock at an average price of $3.95 per share under the Sales Agreement.

From April 1, 2020 through May 7, 2020, the Company sold an aggregate of 4,348,869 shares of common stock for aggregate gross

proceeds of $29,862 under the Sales Agreement.

On April 30, 2020, the Company, the Subsidiary and the German Subsidiary entered into a Finance

Contract (the “Finance Contract”), with the European Investment Bank (the “Bank”), pursuant to which the

Subsidiary obtained a loan in the amount of €50 million, subject to certain milestones being reached (the “Loan”),

payable in three tranches, with the first tranche consisting of €20 million.

Each of the Company and the Subsidiary are guarantors

under the Finance Contract.

The Borrower is required to repay the First Tranche and the Second Tranche, with all other amounts

owed thereunder, in a single installment on the maturity date of that tranche, which is 5 years from the relevant disbursement

The Borrower is required to repay

the Third Tranche, with all other amounts owed thereunder, in equal installments, with the first such payment not earlier than

30 days from the disbursement date but not later than the first repayment immediately following the fourth anniversary of the disbursement

date and the last repayment on a date not later than five years from the disbursement date.

Each tranche shall have an interest

rate of between 3% to 4%.

The Approved Financing will support up to 50% of the registrant’s research and development project

In addition to any interest payable

on the Loan, the Bank is entitled to receive royalties from future revenues for a period of seven years starting 2024, in an amount

equal to between 0.2% to 2.3% of the Company’s consolidated revenues.

From April 1, 2020 through May 7, 2020, warrants to purchase shares of common stock were exercised

by investors at an exercise price of $7.00 per share, resulting in the issuance of 286,311 shares of common stock for net proceeds

of approximately $2,004.

On May 5, 2020, the Company entered into a securities purchase agreement with two institutional

investors, or the Investors, pursuant to which the Company sold, in a registered public offering directly to the Investors, 1,587,302

shares of common stock for net proceeds of approximately $15,000.

Management’s Discussion and Analysis of Financial

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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

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 other 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 technology developments,

Forward-looking statements

may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments,

future financial conditions, results or projections or current expectations.

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● achieving regulatory approvals, including under accelerated paths;

● receipt of future funding from the Israel Innovation Authority, or IIA, the European Union's Horizon 2020 program, the Biomedical

Advanced Research and Development Authority, or BARDA, as well as grants from other independent third parties;

● receipt of future funding from the Israel Innovation Authority, or IIA, the European Union’s Horizon 2020 program, as well

as grants from other independent third parties;

● the receipt of funds pursuant to our agreement with the European Investment Bank, or the EIB, and whether we will achieve the

milestones necessary to receive funds thereunder;

● our marketing plans, including timing of marketing our product candidates, PLX-PAD and PLX-R18, and the filing of any requests

1 unchanged sentence

● developing capabilities for new clinical indications of placenta expanded (PLX) cells and new products;

● our plan for the initiation of a multinational regulated clinical trial program for the potential use of PLX cells in the treatment

of patients suffering from complications associated with the COVID-19 pandemic;

● our estimations regarding the size of the global market for our product candidates;

4 unchanged sentences

● information with respect to any other plans and strategies for our business;

Our business and operations are subject to substantial

risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.

In addition, historic

results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or

trials would not suggest different conclusions.

Also, historic results referred to in this periodic report would be

interpreted differently in light of additional research, clinical and preclinical trials results.

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 Factors”

in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, or

the 2019 Annual Report.

Readers are also urged to carefully review and consider the various disclosures we have made in that

As used in this quarterly

report, the terms “we”, “us”, “our”, the “Company”

● our expectation regarding the impact of the COVID-19 pandemic, including on our clinical trials and operations.

Our business and operations are subject to

substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.

In addition, historic results of scientific

research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest

different conclusions.

Also, historic results referred to in this periodic report would be interpreted differently in light of

additional research, clinical and preclinical trials results.

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 Factors”

in Part I, Item 1A, of our Annual Report on Form 10-K for

the fiscal year ended June 30, 2019, or the 2019 Annual Report, as well as Item 1A of this Quarterly Report.

Readers are also urged

to carefully review and consider the various disclosures we have made in that report.

As used in this quarterly report, the terms

“we”, “us”, “our”, the “Company”

and “Pluristem”

mean Pluristem Therapeutics Inc.

and our wholly owned subsidiary, Pluristem Ltd., unless otherwise indicated or as otherwise required

mean Pluristem Therapeutics

and our wholly owned subsidiaries, Pluristem Ltd.

and Pluristem GmbH, unless otherwise indicated or as otherwise required

by the context.

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of placenta-based cell therapy product candidates for the treatment of multiple ischemic, inflammatory and hematologic conditions.

Our lead indications are critical limb ischemia, or CLI, muscle recovery following surgery for hip fracture, and acute radiation

syndrome, or ARS.

Each of these indications is a severe unmet medical need.

We were incorporated in Nevada in 2001, and have a

wholly owned subsidiary in Israel called Pluristem Ltd.

We operate in one segment and our operations are focused on the research,

development, clinical trials and manufacturing of cell therapeutics and related technologies.

PLX cells are derived from

a class of placental cells that are harvested from donated placenta at the time of full term healthy delivery of a baby.

products require no tissue matching prior to administration.

They are produced using our proprietary three-dimensional expansion

Our manufacturing facility complies with the European, Japanese, Israeli, South Korean and U.S.

Our lead indications are critical limb ischemia, or CLI, muscle recovery following surgery for hip fracture.

In addition, we are

focusing on other indications such as acute radiation syndrome, incomplete recovery following bone marrow transplantation, Chronic

Graft Versus Host Disease (cGVHD) and intermittent claudication.

In addition, in April 2020, we initiated a compassionate use

program in the U.S.

and in Israel for the treatment of patients suffering from acute respiratory failure as a result of COVID-19

with our PLX cells.

In April 2020, we filed an investigation new drug, or IND, application with the U.S.

Food and Drug Administration,

or FDA’s, current Good Manufacturing Practice requirements and has been approved by the European and Israeli regulators for

production of PLX-PAD for late stage trials.

In December 2017, after an audit of our facilities, we were granted manufacturer/importer

authorization and Good Manufacturing Practice Certification by Israel’s Ministry of Health.

If we obtain FDA and other regulatory

approvals to market PLX cells, we expect to have in-house production capacity to grow PLX cells in commercial quantities.

Our goal is to make significant progress with

our clinical pipeline and our clinical pivotal trials in order to ultimately bring innovative, potent therapies to patients who

need new treatment options.

or the FDA, and the PEI for the initiation of a multinational, regulated clinical trial program relating to complications associated

with COVID-19.

In May 2020, the FDA cleared our IND application for the Phase II study of our PLX cells in the treatment of severe

COVID-19 cases complicated by Acute Respiratory Distress Syndrome, or ARDS.

Each of these indications is a severe unmet medical

We were incorporated in Nevada in 2001, and have a wholly owned subsidiary in Israel called Pluristem Ltd.

owned subsidiary in Germany called Pluristem GmbH.

We operate in one segment and our operations are focused on the research, development,

clinical trials, manufacturing and marketing of cell therapeutics and related technologies.

PLX cells are derived from a class of placental

cells that are harvested from donated placenta at the time of full term healthy delivery of a baby.

PLX cell products require no

tissue matching prior to administration.

They are produced using our proprietary three-dimensional expansion technology.

Our manufacturing

facility complies with the European, Japanese, Israeli, South Korean and the FDA’s current Good Manufacturing Practice requirements

and has been approved by the European and Israeli regulators for production of PLX-PAD for late stage trials.

In December 2017,

after an audit of our facilities, we were granted manufacturer/importer authorization and Good Manufacturing Practice Certification

by Israel’s Ministry of Health.

If we obtain FDA and other regulatory approvals to market PLX cells, we expect to have in-house

production capacity to grow PLX cells in commercial quantities.

Our goal is to make significant progress

with our clinical pipeline and our clinical trials in order to ultimately bring innovative, potent therapies to patients who need

new treatment options.

We expect to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale

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sale of our products, partnerships, licensing deals, and joint ventures with pharmaceutical companies.

We aim to shorten the time to commercialization

of our product candidates by leveraging unique accelerated regulatory pathways that exist in the United States, Europe and other

territories to bring innovative products that address life-threatening diseases to the market efficiently.

We believe that these

accelerated pathways create substantial opportunities for us and for the cell therapy industry as a whole.

We have determined to invest our resources primarily

on the PLX-PAD Phase III clinical trials relating to CLI and muscle recovery following surgery for hip fracture, and focus on finalizing

the clinical trials in the United States, Europe and Israel while we prepare for the marketing phase, with the initiation of such

marketing phase subject to regulatory approval, in these territories.

Our Current Clinical Development Pipeline

Two Phase III multinational clinical trials

2 unchanged sentences

for hip fracture.

In April 2019, we successfully enrolled over 50% of patients in our Phase III study in CLI, which allows for

an interim analysis of efficacy after a one-year follow-up period under the European Medicines Agency’s, or EMA, Adaptive

Pathways pilot project, or the Adaptive Pathways Project, in which PLX-PAD was selected to participate In December 2019, we successfully

enrolled 75% of the patients and, based on our current patient enrollment progress, we expect to complete the follow up of our

Phase III study in CLI in the first half of 2020 with respect to the European adaptive pathway, and in the first half of 2021 with

respect to the United States.

In December 2019, we successfully enrolled 50% of patients in our Phase III study in muscle recovery

following surgery for hip fracture and, based on our current patient enrollment progress, we expect to complete the enrollment

for our Phase III study in muscle recovery following surgery for hip fracture during the third quarter of 2020 and efficacy follow

up by the end of the first quarter of 2021.

We expect to release the clinical trial results shortly after the conclusion of the

Our PLX-PAD cell program in CLI had been selected

for the EMA’s Adaptive Pathways Project, Japan’s Pharmaceuticals and Medical Devices Agency, or PMDA, accelerated pathway,

the FDA Fast Track Designation and FDA Expanded Access Program, or EAP, in the United States.

The CLI program in the European Union

was awarded a Euro 7,600,000 (approximately $8,500,000) grant as part of the European Union’s Horizon 2020 program and to

date we have received a portion of such grant.

Our PLX-PAD cell program in muscle recovery

following surgery for hip fracture was also selected for the EMA’s Adaptive Pathways Project and was awarded a Euro 7,400,000

(approximately $8,300,000) grant as part of the European Union’s Horizon 2020 program and to date we have received a portion

of such grant.

Our second product candidate, PLX-R18, is under development in the

United States for ARS via the FDA Animal Rule regulatory pathway, and, based on our assessment, is expected to advance to a pivotal

trial, which may also result in approval without the prior performance of human efficacy trials.

The National Institutes of Health’s

National Institute of Allergy and Infectious Diseases has completed a dose selection trial with our PLX-R18 product candidate in

the hematologic component of ARS.

We have submitted a proposal to BARDA to fund an additional non-human primates study, which is

strategically designed to demonstrate the superiority of PLX-R18 versus current standards, with the goal of executing a full contract

once the study is completed.

PLX-R18 is also under development in the United

States and Israel for the treatment of incomplete hematopoietic recovery following hematopoietic cell transplantation, or HCT.

In March 2019, we announced that we had fully enrolled the second cohort of six patients in our ongoing Phase I clinical trial

in HCT, and received data and safety monitoring board approval to continue to the final cohort of the trial.

In September 2018,

we announced that the FDA granted orphan drug designation to our PLX cell therapy for the treatment of graft failure and incomplete

For the CLI study, we have enrolled more

than 80% of patients but have observed a slowdown in the enrollment rate of this study due to the COVID-19 pandemic.

We are finalizing

discussions with the FDA and European Medicines Agency regarding the data readout, and confirming understandings on endpoints,

timing, and procedures for cleaning data during COVID-19 limitations.

We expect the announcement of the interim readout top line

results to be delayed to the beginning of the fourth quarter of calendar year 2020.

We will continue to closely follow the guidelines

that will enable access to the clinical sites to clean the data prior to data lock.

For the muscle recovery following surgery

for hip fracture study, we have enrolled more than 60% of patients but have observed a slowdown in the enrollment rate of this

study due to the COVID-19 pandemic.

We intend to provide guidelines for expected

end of enrollment for both studies once we have greater clarity of the impact of COVID-19 on the enrollment rates in each respective

Our PLX-PAD cell program in CLI had been

selected for the EMA’s Adaptive Pathways Project, Japan’s Pharmaceuticals and Medical Devices Agency, or PMDA, accelerated

pathway, the FDA Fast Track Designation and FDA Expanded Access Program, or EAP, in the United States.

Both our CLI and muscle recovery following

surgery for hip fracture programs in the European Union were awarded a grant of Euro 7,600,000 (approximately $8,300,000) and 7,400,000

(approximately $8,100,000) , respectively, as part of the European Union’s Horizon 2020 program and to date we have received

a portion of such grants.

Our second product candidate, PLX-R18, is

under development in the United States for ARS via the FDA Animal Rule regulatory pathway, which may result in approval without

the prior performance of human efficacy trials.

The National Institutes of Health’s National Institute of Allergy and Infectious

Diseases has completed a dose selection trial with our PLX-R18 product candidate in the hematologic component of ARS.

PLX-R18 is also under development in the

United States and Israel for the treatment of incomplete hematopoietic recovery following hematopoietic cell transplantation, or

In addition, the FDA granted orphan drug designation to our PLX cell therapy for the treatment of graft failure and incomplete

hematopoietic recovery following HCT.

PLX cells for the treatment of respiratory complications

associated with COVID19

In March 2020, we announced that we signed

a collaborative agreement with the BIH Center for Regenerative Therapy and the Berlin Center for Advanced Therapies at Charité

University of Medicine Berlin to expand our existing framework and research agreement and conduct a joint project evaluating the

therapeutic effects of our patented PLX cell product candidates for potential treatment of the respiratory and inflammatory complications

associated with the COVID-19 coronavirus.

We also announced that the Israeli Ministry of Health has approved our request to seek

approvals to treat COVID-19 coronavirus patients under the per-patient compassionate use framework in Israel.

In April 2020, we

announced the preliminary data from our compassionate use program, treating seven patients suffering from acute respiratory failure

and inflammatory complications associated with COVID-19 with our PLX cells, in three medical centers in Israel.

We also announced

that we treated our first patient suffering from COVID-19 complications in the United States under the FDA Single Patient Expanded

Access Program, also called a compassionate use program, which is part of the U.S.

Coronavirus Treatment Acceleration Program

(CTAP), an emergency program for possible therapies that uses every available method to move new treatments to patients as quickly

We have filed for an IND and Phase II protocol with the FDA and the PEI to initiate a multinational clinical trial

for the treatment of complications associated with COVID-19 with our PLX cells.

In May 2020, the FDA cleared our IND application

for the Phase II study of our PLX cells in the treatment of severe COVID-19 cases complicated by ARDS.

EIB Financing

On April 30, 2020, we announced that we,

and our subsidiaries, signed an agreement with the EIB with respect to a €50 million non-dilutive financing, or the EIB Financing,

to support our research and development in the E.U.

to further advance our regenerative cell therapy platform, and to assist moving

the products in our pipeline to market, with a special focus on clinical development of PLX cells as a treatment for complications

associated with COVID-19.

The EIB Financing will be deployed in three tranches, subject to the achievement of certain clinical,

regulatory and scaling up milestones with the first tranche consisting of €20 million.

The EIB Financing is not secured and

will be payable to the EIB in lump sums following 5 years from the disbursement of the first and second tranches and, for the third

tranche, in two annual payments following 4 years from its disbursement, with each tranche having an interest rate of between 3%

to 4%.The EIB Financing will support up to 50% of our research and development project costs.

In addition, the EIB is entitled

to receive royalties from future revenues for a period of seven years starting 2024, at a rate of 0.2% to 2.3%, pro-rated to the

amounts that we disbursed from the EIB Financing.

RESULTS OF OPERATIONS –

SIX MONTHS ENDED DECEMBER 31, 2019 COMPARED TO THREE AND SIX MONTHS ENDED DECEMBER 31, 2018.

Revenues for both the six

and three month periods ended December 31, 2019 were $23,000, as compared to $54,000 and $50,000, respectively, in the six and

three month periods ended December 31, 2018.

All revenues were related to the sale of our PLX cells for research use.

AND NINE MONTHS ENDED MARCH 31, 2020 COMPARED TO THREE AND NINE MONTHS ENDED MARCH 31, 2019.

Revenues for the nine month

period ended March 31, 2020 were $23,000, as compared to $54,000 in the nine month period ended March 31, 2019.

We had no revenues

during the three month periods ended March 31, 2020 and March 31, 2019.

All revenues were related to the sale of our PLX cells

for research use.

Research and Development Expenses, Net

Research and development expense, net (costs less participation and grants by the Horizon 2020 and IIA) for the six month

period ended December 31, 2019 decreased by 23% from $13,020,000 for the six month period ended December 31, 2018 to $10,022,000.

The decrease is mainly attributed to:

(1) a decrease in materials consumption, (2) a decrease in subcontractor expenses related

to a decrease in the initiation of sites for our clinical studies and other subcontractors related to materials productions,

(3) a decrease in payroll expenses related to a decrease in the average number of employees, (4) a decrease in rent expenses

due to the implementation of Accounting Standards Update No.

Research and development

expense, net (costs less participation and grants by the Horizon 2020 and IIA) for the nine month period ended March 31, 2020 decreased

by 25% from $20,847,000 for the nine month period ended March 31, 2019 to $15,739,000.

The decrease is mainly attributed to a cost

reduction and efficiency plan that consisted primarily of (1) a decrease in materials consumption, (2) a decrease in payroll expenses

related to a decrease in the average number of employees, (3) a decrease in stock-based compensation expenses related to the amount

of restricted stock units granted and their vesting schedules, (4) a decrease in clinical subcontractor expenses due to a decrease

in the initiation of sites for our clinical studies compared to last year, and (5) a decrease in rent expenses due to the implementation

of Accounting Standards Update No.

2016-02, “Leases,”

which resulted in a reduction

of $85,000 (for further information please refer to Note 3 in the accompanying financial statements to this Quarterly Report

on Form 10-Q) and (5) a decrease in travel expenses related to our clinical studies.

The decrease was partially offset by

lower participation by the European Union with respect to the Horizon 2020 grants, due to the fact that most of the grant

is utilized in the beginning of the projects.

Research and development expense, net (costs less participation and grants by

the IIA and other parties) for the three month period ended December 31, 2019 decreased by 26% from $6,256,000 for the three

month period ended December 31, 2018 to $4,640,000.

The decrease is mainly attributed to:

(1) a decrease in materials consumption,

(2) a decrease in payroll expenses related to a decrease in the average number of employees and (3) a decrease in subcontractor

expenses related to a decrease in the initiation of sites for our clinical studies and other subcontractors related to materials

which resulted in a reduction of $130,000 (for further information

please refer to Note 3 in the accompanying financial statements to this Quarterly Report on Form 10-Q).

The decrease was partially

offset by lower participation by the European Union with respect to the Horizon 2020 grants, which was primarily utilized in the

first year of the projects, and a lower participation by the IIA due to a decrease in the grant obtained in calendar year 2019

to calendar year 2018.

Research and development

expense, net (costs less participation and grants by the IIA and other parties) for the three month period ended March 31, 2020

decreased by 27% from $7,827,000 for the three month period ended March 31, 2019 to $5,717,000.

The decrease is mainly attributed

to a cost reduction and efficiency plan that consisted primarily of (1) a decrease in materials consumption, (2) a decrease in

stock-based compensation expenses related to the amount of restricted stock units granted and their vesting schedules and (3) a

decrease in payroll expenses related to a decrease in the average number of employees.

The decrease was partially offset by lower

participation by the European Union with respect to the Horizon 2020 grants, which was primarily utilized in the first year of

the projects, a lower participation by the IIA due to a decrease in the grant obtained in calendar year 2019 to calendar year 2018

and an increase in subcontractor expenses related to some of our clinical studies

General and Administrative

General and administrative

expenses for the six month period ended December 31, 2019 decreased by 18% from $4,333,000 for the six month period ended December

expenses for the nine month period ended March 31, 2020 decreased by 23% from $6,806,000 for the nine month period ended March

31, 2019 to $5,245,000.

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General and administrative

expenses for the three month period ended December 31, 2019 decreased by 17% from $2,123,000 for the three month period ended December

expenses for the three month period ended March 31, 2020 decreased by 32% from $2,473,000 for the three month period ended March

31, 2019 to $1,682,000.

This decrease is attributed to a decrease in stock-based compensation expenses related to the amount of

restricted stock units granted and their vesting schedules, a decrease in corporate activities expenses and a decrease in payroll

expenses related to a 25% reduction of the annual salary of our Chief Executive Officer, a 25% reduction of the annual compensation

of our Executive Chairman and a decrease in the average number of employees.

restricted stock units granted and their vesting schedules and decrease in corporate activities expenses.

Financial Income (Expense),

Financial income (expense),

net, increased from a net financial expense of $168,000 for the six month period ended December 31, 2018 to a net financial income

of $54,000 for the six month period ended December 31, 2019.

net, changed from a net financial income of $54,000 for the nine month period ended March 31, 2019 to a net financial expense of

$54,000 for the nine month period ended March 31, 2020.

This increase is mainly attributable to the implementation of Accounting

Standards Update No.

2016-02, “Leases,”

which resulted in an expense of $173,000 (for further information please refer

to Note 3 in the accompanying financial statements to this Quarterly Report on Form 10-Q), partially offset by changes in the fair

value of our hedging instruments related to the strength of the U.S.

dollar against the New Israel Shekel, or NIS.

Financial income (expense),

net, changed from a net financial income of $222,000 for the three month period ended March 31, 2019 to a net financial expense

of $108,000 for the three month period ended March 31, 2020.

This increase is mainly attributable to changes in the fair value

of our hedging instruments related to the strength of the U.S.

dollar against the New Israel Shekel, or NIS, offset by the implementation

of Accounting Standards Update No.

2016-02, “Leases,”

which resulted in an expense of $180,000 (for further information

please refer to Note 3 in the accompanying financial statements to this Quarterly Report on Form 10-Q) and expense from exchange

dollar against the NIS, partially offset by lower expense from exchange

rates related to the strength of the U.S.

dollar against the NIS.

Financial expense, net,

decreased from a net financial expense of $352,000 for the three month period ended December 31, 2018 to a net financial

expense of $2,000 for the three month period ended December 31, 2019.

This decrease is mainly attributable to changes in the

fair value of our hedging instruments related to the strength of the U.S.

dollar against the NIS offset by the implementation

of Accounting Standards Update No.

2016-02, “Leases,”

which resulted in an expense of $78,000 (for further

information please refer to Note 3 in the accompanying financial statements to this Quarterly Report on Form 10-Q) and

expense from exchange rates related to the strength of the U.S.

dollar against the NIS.

Net loss for the six and

three month periods ended December 31, 2019 was $13,509,000 and $6,974,000, respectively, as compared to net loss of $17,469,000

and $8,683,000 for the six and three month periods ended December 31, 2018.

The changes were mainly due to decreases in research

and development expenses, as described above.

Net loss per share for the six and three month periods ended December 31, 2019 was

$0.86 and $0.40, respectively, as compared to $1.52 and $0.75 for the six and three month periods ended December 31, 2018.

For the six and three month

periods ended December 31, 2019 and December 31, 2018, we had weighted average shares of common stock outstanding of 15,665,641,

15,927,749 and 11,472,336, 11,579,093, respectively, which were used in the computations of net loss per share for the six and

Net loss for the nine and

three month periods ended March 31, 2020 was $21,016,000 and $7,507,000, respectively, as compared to net loss of $27,547,000 and

$10,078,000 for the nine and three month periods ended March 31, 2019.

The changes were mainly due to decreases in research and

development expenses and general and administrative expenses, as described above.

Net loss per share for the nine and three month

periods ended March 31, 2020 was $1.28 and $0.42, respectively, as compared to $2.38 and $0.86 for the nine and three month periods

ended March 31, 2019.

For the nine and three

month periods ended March 31, 2020 and March 31, 2019, we had weighted average shares of common stock outstanding of 16,376,377,

17,823,207 and 11,554,260, 11,722,553, respectively, which were used in the computations of net loss per share for the nine and

three month periods.

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issuances of shares to employees and consultants, and shares issued as a result of exercises of options.

Liquidity and Capital Resources

As of December 31, 2019, our total current assets

Liquidity and Capital

As of March 31, 2020, our total current assets

were $17,819,000 and total current liabilities were $7,200,000.

On December 31, 2019, we had a working capital surplus of $12,236,000,

stockholders' equity of $15,910,000 and an accumulated deficit of $264,513,000.

On March 31, 2020, we had a working capital surplus of $10,619,000,

stockholders’

equity of $14,169,000 and an accumulated deficit of $272,020,000.

We finance our operations, and plan to continue

doing so, from our existing cash, issuances of our securities and funds from grants from the IIA, European Union’s Horizon

2020 program, Israel’s Ministry of Economy, and other non-dilutive sources.

Our cash and cash equivalents as of December

31, 2019 amounted to $7,300,000 compared to $6,796,000 as of December 31, 2018, and compared to $4,106,000 as of June 30, 2019.

Cash balances changed in the six months ended December 31, 2019 and 2018 for the reasons presented below.

doing so, from our existing cash, issuances of our securities, use of the funds that we may receive pursuant to the EIB Financing

once we meet the applicable milestones, and other non-dilutive grants such as grants from the IIA, European Union’s Horizon

2020 program, Israel’s Ministry of Economy.

Our cash and cash equivalents as of March

31, 2020 amounted to $6,762,000 compared to $9,535,000 as of March 31, 2019, and compared to $4,106,000 as of June 30, 2019.

balances changed in the nine months ended March 31, 2020 and 2019 for the reasons presented below.

Operating activities used cash of $20,047,000

in the six months ended December 31, 2019, compared to $16,773,000 in the six months ended December 31, 2018.

in the nine months ended March 31, 2020, compared to $22,780,000 in the nine months ended March 31, 2019.

Cash used in operating

activities in the six months ended December 31, 2019 and 2018 consisted primarily of payments of salaries to our employees and

payments of fees to our consultants, suppliers, subcontractors, and professional services providers, including the costs of clinical

studies, offset by grants from the IIA, Horizon 2020, Israel’s Ministry of Economy and other research grants.

activities in the nine months ended March 31, 2020 and 2019 consisted primarily of payments of salaries to our employees and payments

of fees to our consultants, suppliers, subcontractors, and professional services providers, including the costs of clinical studies,

partially offset by grants from the IIA, Horizon 2020, Israel’s Ministry of Economy and other research grants.

Investing activities provided cash of $11,334,000

in the six months ended December 31, 2019, compared to cash provided of $12,910,000 for the six months ended December 31, 2018.

The investing activities in the six month period ended December 31, 2019 consisted primarily of the withdrawal of $10,786,000 of

short term deposits, offset by payments of $128,000 related to investment in property and equipment.

The investing activities in

the six month period ended December 31, 2018 consisted primarily of the withdrawal of $13,109,000 of short term deposits, offset

by payments of $193,000 related to investment in property and equipment.

in the nine months ended March 31, 2020, compared to cash provided of $19,685,000 for the nine months ended March 31, 2019.

investing activities in the nine month period ended March 31, 2020 consisted primarily of the withdrawal of $11,490,000 of short

term deposits, partially offset by payments of $157,000 related to investment in property and equipment.

The investing activities

in the nine month period ended March 31, 2019 consisted primarily of the withdrawal of $19,908,000 of short term deposits, partially

offset by payments of $217,000 related to investment in property and equipment and investments in long-term bank deposits of $6,000.

Financing activities generated cash of $11,362,000

during the six months ended December 31, 2019, compared to $2,067,000 for the six months ended December 31, 2018.

during the nine months ended March 31, 2020, compared to $3,825,000 for the nine months ended March 31, 2019.

The cash generated

in the six months ended December 31, 2019 from financing activities is related to net proceeds of $5,967,000 from issuing shares

in the nine months ended March 31, 2020 from financing activities is related to net proceeds of $11,362,000 from issuing shares

of our common stock under our Sale Agreement.

The cash generated in the six months ended December 31, 2018 from financing activities

is related to net proceeds of $1,952,000 from issuing shares of our common stock under our ATM Agreement (as defined below), proceeds

of $107,000 related to a grant received from the Israel-United States Binational Industrial Research and Development Foundation

and net proceeds of $8,000 from the exercise of options.

In July 2017, we entered into the At

Market Sales Agreement, or ATM Agreement, with FBR Capital Markets & Co., MLV & Co.

The cash generated in the nine months ended March 31, 2019 from financing activities

is related to net proceeds of $3,710,000 from issuing shares of our common stock under our ATM Agreement (as defined below) and

the Sale Agreement, proceeds of $107,000 related to a grant received from the Israel-United States Binational Industrial Research

and Development Foundation and net proceeds of $8,000 from the exercise of options.

In April 2020, we and our subsidiaries, Pluristem

and Pluristem GmbH, executed the Finance Contract with the EIB for funding of up to €50 million in the aggregate, payable

in three tranches.

The proceeds from the Finance Contract are intended to support our research and development in the EU to further

advance our regenerative cell therapy platform, and to bring the products in our pipeline to market, with a special focus on clinical

development of PLX cells as a treatment for complications associated with COVID-19.

The proceeds from the Finance Contract are

expected to be deployed in three tranches, subject to the achievement of certain clinical, regulatory and scaling up milestones

with the first tranche consisting of €20 million.

To date, we have not yet received the first tranche of funds from the EIB.

In July 2017, we entered into the At Market

Sales Agreement, or ATM Agreement, with FBR Capital Markets & Co., MLV & Co.

LLC and Oppenheimer & Co.

Inc., each an Agent, which provides that, upon the terms and subject to the conditions and limitations set forth in the ATM

Agreement, we could elect, from time to time, to issue and sell shares of common stock having an aggregate offering price of

up to $80,000,000 through any of the Agents.

Inc., each an

Agent, which provides that, upon the terms and subject to the conditions and limitations set forth in the ATM Agreement, we could

elect, from time to time, to issue and sell shares of common stock having an aggregate offering price of up to $80,000,000 through

any of the Agents.

We were not obligated to make any sales of common stock under the ATM Agreement.

From July 2017 through February 4, 2019, we sold an aggregate of 530,541 shares of common stock pursuant to the ATM Agreement

at an average price of $13.68 per share.

On February 4, 2019, we notified the Agents of the termination of the ATM

From July 2017 through February

4, 2019, we sold an aggregate of 530,541 shares of common stock pursuant to the ATM Agreement at an average price of $13.68 per

On February 4, 2019, we notified the Agents of the termination of the ATM Agreement.

On February 6, 2019, we entered into the Sale

3 unchanged sentences

common stock under the Sale Agreement.

From February 6, 2019 through December 31, 2019, we sold an aggregate of 1,880,918 shares

of common stock pursuant to the Sale Agreement at an average price of $4.83 per share.

During the six months ended

December 31, 2019, we received cash of approximately $332,000 from the IIA towards our research and development expenses.

to the IIA grant terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology

developed using this and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid.

In the absence

of such sales, no payment is required.

Through December 31, 2019, total grants obtained from the IIA aggregated to approximately

$27,685,000 and total royalties paid and accrued amounted to $170,000.

The IIA has supported our

activity in the past fourteen years.

Our previous program, for the thirteen year, was approved by the IIA in 2018 and relates to

a grant of approximately $900,000.

The grant was used to cover research and development expenses for the period of January 1, 2018

to December 31, 2018.

Our most recent program, for the fourteenth year, was approved by the IIA in 2019 and relates to a grant

of approximately $500,000.

From February 6, 2019 through March 31, 2020, we sold an aggregate of 3,556,698 shares of

common stock pursuant to the Sale Agreement for aggregate gross proceeds of $15,273,000.

From April 1, 2020 through May 7, 2020, we

sold an aggregate of 4,348,869 shares of common stock for aggregate gross proceeds of $29,862,000 under the Sale Agreement.

From April 1, 2020 through May 7, 2020, warrants

were exercised by investors at an exercise price of $7.00 per share, resulting in the issuance of 286,311 shares of common stock

for net proceeds of approximately $2,004,000.

On May 5, 2020, we entered into a securities

purchase agreement with two institutional investors, or the Investors, pursuant to which we sold, in a registered public offering

directly to the Investors, 1,587,302 shares of common stock for net proceeds of approximately $15,000,000.

During the nine months ended March 31, 2020,

we received cash of approximately $332,000 from the IIA towards our research and development expenses.

According to the IIA grant

terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology developed using

this and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid.

In the absence of such sales,

no payment is required.

Through March 31, 2020, total grants obtained from the IIA aggregated to approximately $27,685,000 and

total royalties paid and accrued amounted to $170,000.

The IIA has supported our activity in the

past fourteen years.

Our previous program, for the thirteen year, was approved by the IIA in 2018 and relates to a grant of approximately

The grant was used to cover research and development expenses for the period of January 1, 2018 to December 31, 2018.

As of December 31, 2019,

we received total grants of approximately $5,638,000 in cash from the European Union research and development consortiums pursuant

to the Horizon 2020 program.

The currency of our financial

portfolio is mainly in U.S.

dollars and we use options contracts in order to hedge our exposures to currencies other than the U.S.

Our most recent program, for the fourteenth year, was approved by the IIA in 2019 and relates to a grant of approximately $500,000.

The grant was used to cover research and development expenses for the period of January 1, 2019 to December 31, 2019.

As of March 31, 2020, we received total grants

of approximately $5,638,000 in cash from the European Union research and development consortiums pursuant to the Horizon 2020 program.

The currency of our

financial portfolio is mainly in U.S.

dollars and we use options contracts in order to hedge our exposures to currencies other

than the U.S.

For more information, please see Item 7A.

- “Quantitative and Qualitative Disclosures about Market Risk”

the 2019 Annual Report on form 10-K for the fiscal year ended June 30, 2019.

We have an effective Form S-3 registration statement, filed under

the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or the SEC, using a

“shelf”

- “Quantitative and Qualitative Disclosures about Market

in the 2019 Annual Report on form 10-K for the fiscal year ended June 30, 2019.

We have an effective Form S-3 registration

statement, filed under the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission,

or the SEC, using a “shelf”

registration process.

Under this shelf registration process, we may, from time to time, sell common stock,

preferred stock and warrants to purchase common stock, and units of two or more of such securities in one or more offerings up

to a total dollar amount of $200,000,000.

As of February 6, 2020, we have sold 3,900,000 shares of our common stock and warrants

to purchase up to 2,857,143 shares of common stock in a total gross amount of $36,051,000 in offerings we closed in October 2017

and April 2019, 530,541 shares of common stock in a total gross amount of $7,258,542 pursuant to the ATM Agreement, 2,806,398 shares

of common stock in a total gross amount of $12,738,048 pursuant to the Sale Agreement, and may be deemed to have sold an additional

$37,261,952 pursuant to the Sale Agreement.

Under this shelf registration process, we may, from time to time,

sell common stock, preferred stock and warrants to purchase common stock, and units of two or more of such securities in one or

more offerings up to a total dollar amount of $200,000,000.

As of May 7, 2020, we have sold 5,487,302 shares of our common stock

and warrants to purchase up to 2,857,143 shares of common stock in a total gross amount of $51,051,000 in offerings we closed in

October 2017, April 2019 and May 2020, 530,541 shares of common stock in a total gross amount of $7,258,542 pursuant to the ATM

Agreement, 7,905,567 shares of common stock in a total gross amount of $45,134,717 pursuant to the Sale Agreement, and may be deemed

to have sold an additional $4,865,283 pursuant to the Sale Agreement.

We have accumulated a deficit of $272,020,000

4 unchanged sentences

our technology or products, but in the short and medium terms will unlikely exceed our costs of operations.

We will be required to obtain additional liquidity

We may be required to obtain additional liquidity

resources in order to support the commercialization of our products and maintain our research and development and clinical trials

We are continually looking for sources of

funding, including non-diluting sources such as the IIA grants, the European Union grant and other research grants, collaboration

with other companies and sales of our common stock.

As of December 31, 2019, our cash position

(cash and cash equivalents, short-term bank deposits and restricted cash and long-term bank deposits) totaled approximately

$17,060,000 and during January 2020, we raised approximately $3,700,000 under the Sales Agreement.

We are addressing our

liquidity issues by implementing initiatives to allow the continuation of our activities.

Our current operating plan includes

various assumptions concerning the level and timing of cash outflows for operating activities and capital expenditures.

ability to successfully carry out our business plan, which includes a cost-reduction plan should we be unable to raise

sufficient additional capital, is primarily dependent upon our ability to (1) obtain sufficient additional capital, (2) enter

into license agreements to use or commercialize our products and (3) receive other sources of funding, including non-diluting

sources such as the IIA grants, the Horizon 2020 grant and other grants.

There are no assurances, however, that we will be

successful in obtaining an adequate level of financing needed for the long-term development and commercialization of our

According to management’s estimates, liquidity

resources as of December 31, 2019, together with the funds received under the Sales Agreement during January 2020, will be sufficient

to maintain our operations into the second quarter of fiscal year 2021.

Our inability to raise funds to carry out our business

plan will have a severe negative impact on our ability to remain a viable company.

We are continually looking for sources

of funding, including non-diluting sources such as the EIB Financing, the IIA grants, the European Union grant and other research

grants, collaboration with other companies and sales of our common stock.

We believe that we have sufficient cash to

fund our operations for at least the next 12 months.

Off Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements