What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-09-13 compared with 2020-09-10 · 977 added, 1248 removed, 232 unchanged (91% of the section changed)

Financial Statements and Supplementary Data.

Our financial statements are stated in thousands

United States dollars (US$) and are prepared in accordance with U.S.

The following audited consolidated financial

statements are filed as part of this Annual Report:

Report of Independent Registered Public Accounting Firm, dated September 10, 2020.

Our financial statements are stated in thousands United States dollars

and are prepared in accordance with U.S.

following audited consolidated financial statements are filed as part of this Annual Report:

Reports of Independent Registered Public Accounting Firm, dated September 13, 2021

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss.

Statements of Comprehensive Loss

Statements of Changes in Equity

1 unchanged sentence

Notes to the Consolidated Financial Statements

THERAPEUTICS INC.

PLURISTEM THERAPEUTICS

AND ITS SUBSIDIARIES

FINANCIAL STATEMENTS

of June 30, 2020

THERAPEUTICS INC.

AND ITS SUBSIDIARY

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL

of June 30, 2021

PLURISTEM THERAPEUTICS

AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2021

DOLLARS IN THOUSANDS

2 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Statements of Changes in Stockholders’

Statements of Changes in Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered

Public Accounting Firm

To the board of directors and shareholders of Pluristem Therapeutics

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of Pluristem Therapeutics Inc.

and its subsidiaries (the “Company”) as of June 30, 2021, and the related consolidated

statements of operations, of changes in shareholders’ equity and of cash flows for the year then ended, including the related notes (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company at June 30, 2021, and the results of its operations and its cash flows

for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of

the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based

on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and

are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements

in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is

not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates

made by management, as well as evaluating the overall presentation of the consolidated

financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period

audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that

(i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,

subjective, or complex judgments.

We determined there are no critical audit matters.

/s/ Kesselman & Kesselman

Certified Public Accountants (lsr.)

A member firm of PricewaterhouseCoopers International

Haifa, Israel

September 13, 2021

We have served as the Company’s

auditor since 2021.

Kost Forer Gabbay & Kasierer

3 unchanged sentences

+972-3-5622555

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Stockholders and Board of Directors Of

THERAPEUTICS INC.

on the Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and

Board of Directors Of

PLURISTEM THERAPEUTICS INC.

Opinion on the Financial Statements

have audited the accompanying consolidated balance sheets of Pluristem Therapeutics Inc.

and its subsidiaries (the

“Company”) as of June 30, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, changes

in stockholders’

equity and cash flows for each of the three years in the period ended June 30, 2020 and the related notes

(collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company at June 30, 2020 and 2019, and the results of its

operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with U.S.

accepted accounting principles.

We also have audited,

in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s

internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control-Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated September

12, 2019 expressed an unqualified opinion thereon.

“Company”) as of June 30, 2020, the related consolidated statements of operations, comprehensive loss, changes in stockholders’

equity and cash flows for the year ended June 30, 2020 and the related notes (collectively referred to as the “consolidated financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company at June 30, 2020, and the results of its operations and its cash flows for the year ended June 30, 2020, in conformity

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are

required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Our audits included performing procedures to

assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ KOST FORER GABBAY &

A Member of Ernst &

We have served as the

Company’s auditor since 2003.

A Member of Ernst & Young

We have served as the Company’s

auditor from 2003 to 2020.

Tel Aviv, Israel

September 10, 2020

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

PLURISTEM THERAPEUTICS INC.

CONSOLIDATED BALANCE SHEETS

Dollars in thousands (except share and per

Dollars in thousands (except share and

per share data)

CURRENT ASSETS:

2 unchanged sentences

Restricted cash

Other current assets

Total current assets

Prepaid expenses and other current assets

Total current

LONG-TERM ASSETS:

Long-term deposits and restricted bank deposits

Long-term deposits

Restricted bank deposits

Severance pay fund

3 unchanged sentences

Total long-term assets

The accompanying notes are an integral part of the consolidated

financial statements.

THERAPEUTICS INC.

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Dollars in thousands (except share and per

LIABILITIES AND STOCKHOLDERS’

Dollars in thousands (except share and per share data)

LIABILITIES AND SHAREHOLDERS’

CURRENT LIABILITIES

Trade payables

Accrued expenses

Operating lease liability, current

Other accounts payable

Total current liabilities

Operating lease

accounts payable

current liabilities

LONG-TERM LIABILITIES

Accrued severance pay

Operating lease liability

Other long-term liabilities

Total long-term

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

Accrued severance

Operating lease

Loan from the European Investment Bank (EIB)

long-term liabilities

AND CONTINGENCIES

SHAREHOLDERS’

Share capital:

Common stock $0.00001 par value per share:

60,000,000 shares

Issued and outstanding:

Common shares, $ 0.00001 par value per share:

60,000,000 shares Issued and outstanding:

31,957,782 shares as of June 30, 2021;

25,492,713 shares as of June 30, 2020

Additional paid-in capital

Accumulated deficit

Total stockholders’

Additional paid-in

shareholders’ equity

Total liabilities

and stockholders’

The accompanying notes are an integral part of the consolidated

financial statements.

and shareholders’ equity

(*) Less than $1

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in thousands (except share and per

Year ended June 30,

Cost of revenues

Dollars in thousands (except share and per share data)

ended June 30,

Operating Expenses:

Research and development expenses

development expenses

participation grants by the Israel Innovation Authority, Horizon 2020 and other parties

Research and development expenses, net

General and administrative expenses, net

Total operating loss

Financial income, net

Net loss for the period

development expenses, net

and administrative expenses

Total operating

Loss per share:

Basic and diluted net loss per share

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

The accompanying notes are an integral part of the consolidated

financial statements.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

STATEMENTS OF COMPREHENSIVE LOSS

Dollars in thousands (except share and per share data)

Year ended June 30,

Other comprehensive loss, net:

Unrealized gain on available-for-sale marketable securities, net

Reclassification adjustment of available-for-sale marketable securities gains realized in net loss, net

Other comprehensive loss

Total comprehensive loss

The accompanying notes are an integral part of the consolidated

financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES

IN STOCKHOLDERS’

Dollars in thousands (except share and per

Additional Paid-in

Accumulated Other Comprehensive

Total Stockholders’

Income (Loss)

Balance as of July 1, 2017

Exercise of options by employees

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

Issuance of common stock under At-The Market Agreement, net of issuance costs of $174 (Note 9c)

Issuance of common stock, net of issuance costs of $1,405 (Note 9d)

Exercise of warrants by investors (Note 9b)

Other comprehensive loss, net

Balance as of June 30, 2018

(*) Less than $1

(**) See note 9a for reverse stock split

The accompanying notes are an integral part of the consolidated

financial statements.

and diluted loss per share

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

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES

IN STOCKHOLDERS’

Dollars in thousands (except share and per

STATEMENTS OF CHANGES IN SHAREHOLDERS’

Dollars in thousands (except share and per share data)

Additional Paid-in

Total Stockholders’

Total Shareholders’

Balance as of July 1, 2019

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

Issuance of common stock under At Market Issuance Sales Agreement, and Open Market Sales Agreement, net of aggregate issuance costs of $403 (Note 9c, 9e)

Issuance of common stock and warrants related to April 2019 offering, net of issuance costs of $1,536 (Note 9f)

$ ( 251,004 )

Share-based compensation to employees, directors and non-employee

Issuance of common shares under Open Market Sales Agreement, net of aggregate issuance costs of $ 3,573 (Note 9b)

Issuance of common shares related to May 2020 registered direct offering, net of issuance costs of $ 99 (Note 9d)

Exercise of options by employees and non-employee consultants

Exercise of warrants by investors (Note 9c)

Round up of shares due to reverse share split effectuated

on July 25, 2019 (Note 9a)

Loss for the year

Balance as of June 30, 2020

(*) Less than $1

(**) See note 9a for reverse stock split

The accompanying notes are an integral part of the consolidated

financial statements.

$ ( 280,156 )

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES

IN STOCKHOLDERS’

Dollars in thousands (except share and per

STATEMENTS OF CHANGES IN SHAREHOLDERS’

Dollars in thousands (except share and per share data)

Additional Paid-in

Total Stockholders’

Balance as of July 1, 2019

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

Issuance of common stock under Open Market Sales Agreement, net of aggregate issuance costs of $3,573 (Note 9e)

Issuance of common stock related to May 2020 registered direct offering, net of issuance costs of $99 (Note 9h)

Exercise of options by employees and non-employee consultants

Exercise of warrants by investors (Note 9g)

Round up of shares due to reverse stock split effectuated on July 25, 2019 (see Note 9a)

Balance as of June 30, 2020

Total Shareholders’

Balance as of

$ ( 280,156 )

compensation to employees, directors and non-employee consultants

Issuance of common shares under ATM Agreement, net of issuance costs

of $ 380 (Note 9e)

Issuance of common shares related to February 2021 registered direct offering net of issuance costs of $ 1,923 (Note 9g)

options by employees and non-employee consultants

warrants by investors (Note 9f)

as of June 30, 2021

$ ( 330,021 )

(*) Less than $1

(**) See note 9a for reverse stock split

The accompanying notes are an integral part of the consolidated

financial statements.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Dollars in thousands

Year ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Loss from sale of property and equipment, net

Accretion of discount, amortization of premium and changes in accrued interest of marketable securities

Gain from sale of investments of available-for-sale marketable securities

Other-than-temporary loss of available-for-sale marketable securities

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

Decrease (increase) in accounts receivable from the IIA

Increase in other current and other long-term assets

Increase (decrease) in trade payables

Decrease in operating lease right-of-use asset and liability, net and effect of exchange rate differences

Increase (decrease) in other accounts payable, accrued expenses, other long-term liabilities and other current liabilities

Decrease (increase) in interest receivable on short-term deposits

Linkage differences and interest on short and

long-term deposits and restricted bank deposits

Accrued severance pay, net

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Proceeds from (investment in) short-term deposits

Investment in long-term deposits

Proceeds from sale of available-for-sale marketable securities

Proceeds from redemption of available-for-sale marketable securities

Investment in available-for-sale marketable securities

Net cash provided by investing activities

The accompanying notes are an integral part of the consolidated

financial statements.

THERAPEUTICS INC.

The accompanying notes are an

integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

Year ended June 30,

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds related to issuance of common stock, net of issuance costs

Proceeds with respect to Israel-United States Binational Industrial Research and Development Foundation

Exercise of options and warrants

Net cash provided by financing activities

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at the beginning of the period

Cash, cash equivalents and restricted cash at the end of the period

(a) Supplemental disclosure of cash flow activities:

Cash paid during the period for:

Taxes paid due to non-deductible expenses

(b) Supplemental disclosure of non-cash activities:

Purchase of property and equipment on credit

The accompanying notes are an integral part of the consolidated

financial statements.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

Therapeutics Inc., a Nevada corporation (“Pluristem Therapeutics”), was incorporated on May 11, 2001.

Therapeutics has a wholly owned subsidiary, Pluristem Ltd.

(the “Subsidiary”), which is incorporated under the

laws of the State of Israel.

In January 2020, the Subsidiary established a wholly owned subsidiary, Pluristem GmbH (the

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

Pluristem Therapeutics, the Subsidiary and

the German Subsidiary are referred to as the “Company”

or “Pluristem”.

The Company’s

shares of common stock are traded on the Nasdaq Capital Market and on the Tel-Aviv Stock Exchange under the symbol “PSTI”.

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 programs in the United States

and Israel and commenced enrollment in its Phase II study of PLX cells for the treatment of severe COVID-19 complicated by Acute

Respiratory Distress Syndrome (“ARDS”).

Company has incurred an accumulated deficit of approximately $280,156 and incurred recurring operating losses and negative cash

flows from operating activities since inception.

As of June 30, 2020, the Company’s total stockholders’

equity amounted

During the year ended June 30, 2020, the Company incurred operating

losses of $29,476 and its negative cash flow from operating activities was $26,369.

of June 30, 2020, the Company’s cash position (cash and cash equivalents, short-term bank deposits and restricted cash and

long-term bank deposits) totaled approximately $58,992.

The Company plans to continue to finance its operations with the current

resources and potential funds it will obtain from the European Investment Bank (the “EIB”) finance contract (the “Finance

Contract”) (See note 1c) once certain milestones are reached, and also by entering into licensing or other commercial agreements,

grants to support its research and development activities and with sales of equity securities.

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 issuance of these consolidated financial statements.

There are no assurances,

however, that the Company will be able to obtain an adequate level of financial resources that are required for the long-term

development and commercialization of its product.

Finance contract

April 30, 2020, Pluristem entered into a Finance Contract with the EIB, pursuant to which the German Subsidiary can obtain a loan

in the amount of up to €50 million, subject to certain milestones being reached (the “Loan”), payable in three

tranches, with the first tranche consisting of €20 million, second of €18 million and third of €12 million for

a period of 36 months from the signing of the Finance Contract.

The Tranches will be treated

independently, each with its own interest rate and maturity period.

The fixed interest rate is 0% per year for the First Tranche

and 1% for each of the Second Tranche and Third Tranche.

The deferred interest rate is 4% per year for the First Tranche, 3% for

the Second Tranche and 2% for the Third Tranche.

addition to any interest payable on the Loan, EIB is entitled to receive royalties from future revenues, if any, of Pluristem

for a period of seven years starting in 2024, in an amount equal to between 0.2% to 2.3% of the Company’s consolidated revenues,

pro-rated to the amount disbursed from the Loan to Pluristem beginning in the fiscal year 2024 and continuing up to and including

its fiscal year 2030.

of June 30, 2020 Pluristem has not yet disbursed any tranche of the Finance Contract.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

1:- GENERAL (CONT.)

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 IntermittentClaudication

(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.

CHA participated in the Phase II trial in

Intermittent Claudication.

the first regulatory approval for a PLX product in South Korea, for the specified Indications, Pluristem and CHA will establish

an equally owned joint venture to commercialize PLX cell products in South Korea.

Pluristem will be able to use the data generated

by CHA to pursue the development of PLX product candidates outside of South Korea.

CHA Agreement contains customary termination provisions, including in the event the parties do not reach an agreement upon development

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.

Industries Agreement

November 2018, the Company entered into a license agreement with a subsidiary of Chart Industries, Inc.

(“Chart”),

regarding the Company’s thawing device for cell-based therapies.

Pursuant to the terms of the agreement, Chart obtained

the exclusive rights to manufacture and market the thawing device in all territories worldwide, excluding Greater China, and the

Company is entitled to receive royalties from sales of the product and supply of an agreed upon number of thawing devices.

shall commence on the date of Chart’s first commercial sale of the thawing device.

As of June 30, 2020, commercial sale

of the thawing device by Chart has not yet begun.

THERAPEUTICS INC.

ended June 30,

CASH FLOWS FROM OPERATING

to reconcile loss to net cash used in operating activities:

compensation to employees, directors and non-employee consultants

Decrease (increase)

in prepaid expenses and other current assets and other long-term assets

Increase (decrease)

in trade payables

operating lease right-of-use asset and liability, net

Increase (decrease)

in other accounts payable, accrued expenses, other long-term liabilities and other current liabilities

Decrease (increase)

in interest receivable on short-term deposits

Long term interest

payable pursuant to EIB loan

Linkage differences

and interest on long-term deposits and restricted bank deposits

severance pay, net

Net cash used

for operating activities

FROM INVESTING ACTIVITIES:

property and equipment

Proceeds from

withdrawal of (investment in) short-term deposits

in long-term deposits and restricted bank deposits

Net cash used

for investing activities

FLOWS FROM FINANCING ACTIVITIES:

Proceeds related

to issuance of common shares, net of issuance costs

Proceeds related

to exercise of warrants

from EIB loan

Net cash provided

by financing activities

OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS

cash, cash equivalents and restricted cash

cash equivalents and restricted cash at the beginning of the period

cash equivalents and restricted cash at the end of the period

The accompanying notes are an

integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

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

was incorporated on May 11, 2001.

Pluristem Therapeutics has a wholly owned subsidiary, Pluristem Ltd.

(the “Subsidiary”),

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

In January 2020, the Subsidiary established a wholly owned subsidiary, Pluristem

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

Therapeutics, the Subsidiary and the German Subsidiary are referred to as the “Company” or “Pluristem”.

The Subsidiary

and the German Subsidiary are referred to as the “Subsidiaries”.

The Company’s

common shares are traded on the Nasdaq Global Market and on the Tel-Aviv Stock Exchange under the symbol “PSTI”.

The Company is a bio-technology company focused in the field of regenerative medicine and operates in one

business segment.

The Company is developing placenta-based cell therapy product candidates for the treatment of muscle trauma, hematological

disorders, radiation damage and inflammation.

The Company has incurred

an accumulated deficit of approximately $ 330,021 and incurred recurring operating losses and negative cash flows from operating activities

since inception.

As of June 30, 2021, the Company’s total shareholders’ equity amounted to $ 57,151 .

During the year ended June 30,

2021, the Company incurred losses of $ 49,865 and its negative cash flow from operating activities was $ 30,910 .

of June 30, 2021, the Company’s cash position (cash and cash equivalents, short-term bank deposits and long-term bank

deposits) totaled approximately $ 88,219 .

The Company plans to continue to finance its operations from its current resources , by

entering into licensing or other commercial agreements, from grants to support its research and development activities from sales of

its equity securities and from the proceeds from the loan previously provided by the European Investment Bank (the

“EIB”, see also note 7), as well as the potential additional draw down of funds from the Finance Contract (as defined

herein) executed with the EIB, assuming applicable milestones will be achieved.

Management believes that its current resources,

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 issuance of these consolidated financial statements.

There are no assurances, however,

that the Company will be able to obtain an adequate level of financial resources that are required for the long-term development and

commercialization of its products.

- SIGNIFICANT ACCOUNTING POLICIES

consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles

GAAP”) applied on consistent basis.

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.

of Pluristem Therapeutics’

costs and assets are denominated in United States dollars (“dollar”).

The Company’s

management believes that the dollar is the primary currency of the economic environment in which the Company operates.

dollar is the Company’s functional and reporting currency.

Accordingly, non-dollar denominated transactions and balances

have been re-measured into the functional currency in accordance with Accounting Standards Codification (“ASC”) 830,

“Foreign Currency Matters”.

All transaction gains and losses from the re-measured monetary balance sheet items are

reflected in the statements of income as financial income or expenses, as appropriate.

of consolidation

consolidated financial statements include the accounts of Pluristem Therapeutics and the Subsidiaries.

Intercompany transactions

and balances have been eliminated upon consolidation.

and cash equivalents

equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less

at the date acquired.

deposits with original maturities of more than three months but less than one year are presented as part of short-term investments.

Deposits are presented at their cost which approximates market values including accrued interest.

Interest on deposits is recorded

as financial income.

cash and short-term bank deposits

restricted bank deposits and restricted cash used to secure derivative and hedging transactions and the Company’s credit

The restricted cash and short-term bank deposits are presented at cost which approximates market values including accrued

restricted bank deposits

restricted bank deposits with maturities of more than one year used to secure operating lease agreement are presented at cost

which approximates market values including accrued interest.

in marketable securities

Company accounts for its investments in marketable securities in accordance with ASC 320, “Investments –

Debt and Equity

Securities”.

The Company determines the classification of marketable securities at the time of purchase and re-evaluates

such designations as of each balance sheet date.

The Company classifies all of its marketable securities as available-for-sale.

Available-for-sale marketable securities are carried at fair value, with the unrealized gain and loss reported at “accumulated

other comprehensive income (loss)”

in the statement of changes in stockholders’

THERAPEUTICS INC.

The consolidated financial statements

have been prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”) applied on consistent

Use of 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.

Functional currency

Company’s management believes that the dollar is the primary currency of the economic environment in which the Company and the

Subsidiaries operate.

Thus, the dollar is the Company’s functional and reporting currency.

Accordingly, non-dollar

denominated transactions and balances have been re-measured into the functional currency in accordance with Accounting Standards

Codification (“ASC”) 830, “Foreign Currency Matters”.

All transaction gains and losses from the re-measured

monetary balance sheet items are reflected in the statements of income as financial income or expenses, as appropriate.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

gain and loss on sales of marketable securities are included in the Company’s “Financial income, net”

and are derived

using the specific identification basis for determining the cost of marketable securities sold.

The amortized cost of available

for sale debt marketable securities is adjusted for amortization of premiums and accretion of discount to maturity.

Such amortization,

together with coupon interest on available for sale marketable securities, is included in the “Financial income, net”.

Company recognizes an impairment charge when a decline in the fair value of its available-for-sale marketable securities below

the cost basis is judged to be other than temporary.

Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment

has been in a loss position, the extent to which the fair value has been less than the Company’s cost basis, the reason for the

decline in value, the potential recovery period and the Company’s intent to sell, including whether it is more likely than not

that the Company will be required to sell the investment before recovery of cost basis.

ASC 320-10-35, “Investments - Debt

and Equity Securities”, requires other-than-temporary impairment for debt securities to be separated into (a) the amount

representing the credit loss and (b) the amount related to all other factors (provided that the Company does not intend to

sell the security and it is not more likely than not that it will be required to sell it before recovery).

For securities that

are deemed other-than-temporarily impaired, the amount of impairment is recognized in “financial income, net”, in the

statement of operations and is limited to the amount related to credit loss, while impairment related to other factors is recognized

in “other comprehensive income (loss)”.

the year ended June 30, 2018, the Company recognized other-than-temporary impairment loss of $850 (see Note 3).

During the years

ended June 30, 2020 and 2019, the Company did not recognize any other-than-temporary impairment loss.

On July 1, 2017, the Company

adopted ASC 606, “Revenue from Contracts with Customers”

using the modified retrospective method.

Results for reporting

periods beginning after July 1, 2017 are presented under ASC 606, while prior period amounts are not adjusted and continue

to be reported in accordance with the Company’s historic accounting under ASC 605.

Revenue Recognition from sales

Revenues are recognized when

control of the promised goods is transferred to the customer, in an amount that reflects the consideration the Company expects

to be entitled to in exchange for those goods.

The Company determines revenue

recognition through the following steps:

Principles of consolidation

The consolidated financial

statements include the accounts of Pluristem Therapeutics and the Subsidiaries.

Intercompany transactions and balances have been eliminated

upon consolidation.

Cash and cash equivalents

Cash equivalents

are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less at the date acquired.

Short-term bank deposit

Bank deposits with

original maturities of more than three months but less than one year are presented as part of short-term investments.

Deposits are presented

at their cost which approximates market values including accrued interest.

Interest on deposits is recorded as financial income.

Restricted cash and short-term bank deposits

Short-term restricted bank deposits

and restricted cash used to secure derivative and hedging transactions and the Company’s credit line.

The restricted cash and short-term

bank deposits are presented at cost which approximates market values including accrued interest.

Long-term restricted bank deposits

with maturities of more than one year used to secure operating lease agreement are presented at cost which approximates market values

including accrued interest.

Revenue Recognition

Revenues are recognized when control of the promised goods

is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those

The Company determines revenue recognition through the

following steps:

identification of the contract with a customer;

● identification of the performance obligations in the

identification of the performance obligations in the contract;

determination of the transaction price;

● allocation of the transaction price to the performance

obligations in the contract;

● recognition of revenue when, or as, the Company satisfies

a performance obligation.

allocation of the transaction price to the performance obligations in the contract;

recognition of revenue when, or as, the Company satisfies a performance obligation.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

The Company’s contracts

with its customers are expected to include one type of product and thus have only one performance obligation, which is the transfer

of control of the product.

The Company’s PLX cells have an alternative use and, as such, the performance obligation is considered

to be satisfied at a point in time where the customer obtains control over the product.

The Company’s contract

with Chart includes variable consideration for which the Company estimates the most likely amount that should be included in the

transaction price subject to constraints based on the specific facts and circumstances.

Pursuant to the terms of the agreement,

the Company is entitled to receive royalties from sales of the product and supply of an agreed upon number of thawing devices.

Royalties shall commence on the date of Chart’s first commercial sale of the thawing device.

As of June 30, 2020, commercial

sales of the thawing device by Chart have not begun.

Based on the Company’s assessment, it is not probable that a significant

reversal in the amount of cumulative revenue recognized will not occur, and therefore the Company is unable to recognize revenues

with respect to the Chart agreement before the uncertainty associated with the variable consideration is subsequently resolved.

Property and equipment

equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated by the straight-line method over the

estimated useful lives of the assets, at the following annual rates:

Property and equipment

are stated at cost, net of accumulated depreciation.

Depreciation is calculated by the straight-line method over the estimated useful

lives of the assets, at the following annual rates:

Laboratory equipment

2 unchanged sentences

Leasehold improvements

The shorter of the expected useful life or the reasonable assumed term of the lease.

The shorter of the expected useful life or the term of the lease.

Impairment of long-lived assets

The Company’s

long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment”, whenever

events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets

to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected

to be generated by the assets.

If such assets are considered to be impaired, the impairment to be recognized is measured by the

amount by which the carrying amount of the assets exceeds the fair value of the assets.

During fiscal years 2020, 2019 and 2018,

no impairment losses have been identified.

Accounting for stock-based compensation

accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”

(“ASC 718”).

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing

The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option-pricing model.

accounts for employee’s share-based payment awards classified as equity awards (restricted stock (“RS”) or restricted

stock units (“RSUs”)) using the grant-date fair value method.

The fair value of share-based payment transactions is

recognized as an expense over the requisite service period, net of estimated forfeitures.

The Company estimates forfeitures based

on historical experience and anticipated future conditions.

The Company recognized compensation cost for an award with service

conditions and goals achievement that has a graded vesting schedule using the accelerated method based on the multiple-option award

Company’s long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and

Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future

undiscounted cash flows expected to be generated by the assets.

If such assets are considered to be impaired, the impairment to be

recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

During fiscal

years 2021 and 2020, no triggering events were identified, and no impairment losses were recorded.

Accounting for share-based compensation

The Company accounts

for share-based compensation in accordance with ASC 718, “Compensation-Share Compensation” (“ASC 718”).

requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model.

estimates the fair value of share options granted using the Black-Scholes option-pricing model.

The Company accounts for employees’ share-based

payment awards classified as equity awards (restricted shares (“RS”) or restricted share units (“RSUs”)) using

the grant-date fair value method.

The fair value of share-based payment transactions is recognized as an expense over the requisite service

period, net of estimated forfeitures.

The Company estimates forfeitures based on historical experience and anticipated future conditions.

The Company recognized compensation cost for an award with service conditions that has a graded vesting schedule using the accelerated

method based on the multiple-option award approach.

The Company measures

the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The fair value

of service-based share option grants is estimated on the grant date using a Black-Scholes option-pricing model and compensation

expense related to share option grants is recognized on a graded vesting schedule over the vesting period.

For share options

containing a market condition, the market conditions are required to be considered when calculating the grant date fair value.

718 requires selection of a valuation technique that best fits the circumstances of an award.

In order to reflect the substantive

characteristics of the market condition option award, a Monte Carlo simulation valuation model was used to calculate the grant date

fair value of such share options.

Expense for the market condition share options is recognized over the derived service period as

determined through the Monte Carlo simulation model.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

The assumptions below are relevant

to RS and RSUs granted in 2020, 2019 and 2018:

In accordance with ASC 718,

RS and RSUs are measured at their fair value.

All RS and RSUs to employees and directors granted in 2020, 2019 and 2018, were granted

for no consideration;

therefore, their fair value was equal to the share price at the date of grant.

value of all RS and RSUs was determined based on the close trading price of the Company’s shares known at the grant date.

The weighted average grant date fair value of shares granted during 2020, 2019 and 2018, was $3.65, $8.70 and $14.00 per share,

respectively.

In accordance with ASC 718, RS and

RSUs are measured at their fair value.

All RS and RSUs to employees and directors granted during fiscal 2021 and 2020, were granted for

no consideration.

Therefore, their fair value was equal to the share price at the date of grant, unless the RSUs include a market-based

condition in which case the fair value RSUs at the date of grant was calculated using the Monte Carlo model.

The fair value of

all RS and RSUs was determined based on the close trading price of the Company’s shares known at the grant date.

The weighted average

grant date fair value of shares granted during fiscal 2021 and 2020, was $ 9.76 and $ 3.65 per share, respectively.

During fiscal years

2021 and 2020, there were no options granted to employees or directors.

Research and Development expenses, royalty bearing grants and non-royalty bearing grants

Research and development

expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, share-based

compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities,

including clinical trials, manufacturing costs and professional services.

All costs associated with research and developments are expensed

received from the Israel Innovation Authority (the “IIA”) were recognized when the grant becomes receivable, provided there

was reasonable assurance that the Company will comply with the conditions attached to the grant and there was reasonable assurance the

grant will be received.

The grant is deducted from the research and development expenses as the applicable costs are incurred.

development expenses, net for the year ended June 30, 2021 and 2020 include participation in research and development expenses in the

amount of approximately $ 467 and $ 1,519 , respectively.

trial expenses are charged to research and development expense as incurred.

The Company accrues for expenses resulting from obligations

under contracts with clinical research organizations ( “ CROs ” ).

The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows

that do not match the periods over which materials or services are provided.

The Company’s objective is to reflect the appropriate

trial expense in the consolidated financial statements by matching the appropriate expenses with the period in which services and efforts

are expended.

In the event advance payments are made to a CRO, the payments are recorded as other assets, which will be recognized as

expenses as services are rendered.

During fiscal

years 2020, 2019 and 2018, there were no options granted to employees or directors.

Research and Development expenses and royalty bearing

and development expenses, net of participations grants, are charged to the statement of operations as incurred.

Pluristem receives

grants from the Israel Innovation Authority (“IIA”) in the Ministry of Economy and Industry for the purpose of partially

funding approved research and development projects.

The grants are not to be repaid, but instead Pluristem is obliged to pay royalties

as a percentage of future sales if and when sales from the funded projects are generated.

These grants are recognized as a deduction

from research and development costs at the time the Company is entitled to such grants on the basis of the research and development

costs incurred.

Since the payment of royalties is not probable when the grants are received, the Company records a liability in

the amount of the estimated royalties for each individual contract, when the related revenues are recognized, as part of Cost of

For more information regarding such royalties commitments and regarding grants and participation received, see Note 8.

Non-royalty bearing grant

participates in European Union research and development consortiums under Horizon 2020.

In August 2016, the CLI program consortium

was awarded a Euro 7,600 thousands (approximately $8,500) non-royalty bearing grant, of which, an amount of Euro 1,900 thousands

(approximately $2,100) is a direct grant allocated to the Company.

In July 2017, the consortium amended the consortium agreement,

pursuant to which the original grant allocation was amended such that the Company received an additional direct grant of Euro 1,000

thousands (approximately $1,100).

The additional direct grant was allocated to the Company from the total amount of the original

In September 2017, the Company’s Phase III study of PLX-PAD cell therapy in the treatment of muscle injury following

surgery for hip fracture was awarded a Euro 7,400 thousands (approximately $8,300) grant, of which, an amount of Euro 2,550 thousands

(approximately $2,900) is a direct grant allocated to the Company.

In October 2017, the “nTRACK”, a collaborative project

carried out by an international consortium led by LEITAT, was awarded a Euro 6,800 thousands (approximately $7,600) non-royalty

bearing grant, of which, an amount of Euro 500 thousands (approximately $560) is a direct grant allocated to the Company.

In May 2020, the Company was

selected as a member of the CRISPR-IL consortium, a group funded by the IIA.

CRISPR-IL brings together the leading experts in life

science and computer science from academia, medicine, and industry, to develop artificial intelligence (AI) based end-to-end genome-editing

CRISPR-IL is funded by the IIA with a total budget of approximately $10,000, of which, an amount of approximately $480

is a direct grant allocated to the Company, for a period of 18 months, with a potential for extension of an additional 18 months

and additional budget from the IIA.

years 2021 and 2020, the Company also received non-royalty bearing grants from the European Union research and development

consortiums, under Horizon 2020, and from the IIA, under the CRISPR-IL consortium, in the amount of approximately $ 566 and $ 1,227 , for

the year ended June 30, 2021 and 2020, respectively.

The non-royalty bearing grants for funding the projects are recognized at the

time the Company is entitled to each such grant on the basis of the related costs incurred and recorded as a deduction from research

and development expenses.

Loss per share

Basic and diluted

loss per share is computed based on the weighted average number of common shares outstanding during each year.

All outstanding share options

and unvested RSUs have been excluded from the calculation of the diluted loss per common share because all such securities are anti-dilutive

for each of the periods presented.

The total weighted average number of shares related to the outstanding options, warrants and RSU’s

excluded from the calculations of diluted net earnings per share due to their anti-dilutive effect was 5,700,994 and 3,708,807 for the

years ended June 30, 2021 and 2020, respectively.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

The non-royalty

bearing grants for funding the projects are recognized at the time the Company is entitled to each such grant on the basis of the

related costs incurred and recorded as a deduction from research and development expenses.

Loss per share

Basic and diluted net loss

per share is computed based on the weighted average number of shares of common stock outstanding during each year.

All outstanding

stock options and unvested RSUs have been excluded from the calculation of the diluted loss per common share because all such

securities are anti-dilutive for each of the periods presented.

The total weighted average number of shares related to the outstanding

options, warrants and RSU’s excluded from the calculations of diluted net earnings per share due to their anti-dilutive effect

was 3,708,807, 4,942,491 and 1,900,905 for the years ended June 30, 2020, 2019 and 2018, respectively.

accounts for income taxes in accordance with ASC 740, “Income Taxes”

(“ASC 740”).

This Topic prescribes

the use of the liability method, whereby deferred tax assets and liability account balances are determined based on differences

between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that

will be in effect when the differences are expected to reverse.

The Company provides a valuation

allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

ASC 740 establishes a single model

to address accounting for uncertain tax positions.

ASC 740 clarified the accounting for income taxes by prescribing the minimum

recognition threshold a tax position is required to meet before being recognized in the financial statements.

Deferred taxes

are computed using the asset and liability method.

Under the asset and liability method, deferred income tax assets and liabilities are

determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the

currently enacted tax rates and laws.

A valuation allowance is recognized to the extent that it is more likely than not that the deferred

taxes will not be realized in the foreseeable future.

Uncertainty in income taxes

follows a two-step approach in recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition

by determining if the available evidence indicates that it is more likely than not that the position will be sustained based on technical

If this threshold is met, the second step is to measure the tax position as the largest amount that has more than a 50 % likelihood

of being realized upon ultimate settlement.

Concentration of credit risk

instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents,

restricted cash, short-term deposits, long-term deposits and restricted deposits.

The majority of the Company’s

cash and cash equivalents, restricted cash and short-term and long-term deposits are mainly invested in dollar instruments of

major banks in Israel and in the United States.

Deposits in the United States may be in excess of insured limits and are not insured

in other jurisdictions.

Financial instruments

that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash,

short-term deposits, long-term deposits and restricted deposits.

of the Company’s cash and cash equivalents, restricted cash and short-term and long-term deposits are mainly invested in dollar

instruments of major banks in Israel and in the United States.

Deposits in the United States may be in excess of insured limits and are

not insured in other jurisdictions.

Generally, these deposits may be redeemed upon demand and therefore bear minimal risk.

The Company invests

its surplus cash in cash deposits in financial institutions and has established guidelines, approved by the Company’s Investment

invests its surplus cash in cash deposits in financial institutions and has established guidelines, approved by the Company’s Investment

Committee, relating to diversification and maturities to maintain safety and liquidity of the investments.

The Company utilizes

options and forward contracts to protect against the risk of overall changes in exchange rates.

The derivative instruments hedge

a portion of the Company’s non-dollar currency exposure.

Counterparties to the Company’s derivative instruments are

all major financial institutions.

The Company utilizes options

and forward contracts to protect against the risk of overall changes in exchange rates.

The derivative instruments hedge a portion of

the Company’s non-dollar currency exposure.

Counterparties to the Company’s derivative instruments are all major financial

institutions.

Severance pay

of the Company’s agreements with employees in Israel are subject to Section 14 of the Israeli Severance Pay Law, 1963 (“Severance

Pay Law”).

The Company’s contributions for severance pay have replaced its severance obligation.

Upon contribution

of the full amount of the employee’s monthly salary for each year of employment, no additional calculations are conducted

between the parties regarding the matter of severance pay and no additional payments are made by the Company to the employee.

the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet,

as the Company is legally released from the obligation to employees once the deposit amounts have been paid.

of the Company’s agreements with employees in Israel are subject to Section 14 of the Israeli Severance Pay Law, 1963 (“Severance

The Company’s contributions for severance pay have replaced its severance obligation.

Upon contribution of the

full amount of the employee’s monthly salary for each year of employment, no additional calculations are conducted between the parties

regarding the matter of severance pay and no additional payments are made by the Company to the employee.

Further, the related obligation

and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released

from the obligation to employees once the deposit amounts have been paid.

For some employees,

which their agreement is not subject to Section 14 of the Severance Pay Law, the Subsidiary’s liability for severance pay is calculated

pursuant to Israeli Severance Pay Law, based on the most recent salary of the employees multiplied by the number of years of employment,

as of the balance sheet date.

Employees are entitled to one month’s salary for each year of employment or a portion thereof.

The Company’s

liability for all of its employees is fully provided by monthly deposits with insurance policies and by an accrual.

The value of these

policies is recorded as an asset in the Company’s balance sheet.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

employees, which their agreement is not subject to Section 14 of the Severance Pay Law, the Subsidiary’s liability for severance

pay is calculated pursuant to Israeli Severance Pay Law, based on the most recent salary of the employees multiplied by the number

of years of employment, as of the balance sheet date.

Employees are entitled to one month’s salary for each year of employment

or a portion thereof.

The Company’s liability for all of its employees is fully provided by monthly deposits with insurance

policies and by an accrual.

The value of these policies is recorded as an asset in the Company’s balance sheet.

The deposited funds

include profits or losses accumulated up to the balance sheet date.

The deposited funds may be withdrawn only upon the fulfillment

of the obligation pursuant to the Severance Pay Law or labor agreements.

The value of the deposited funds is based on the cash

surrendered value of these policies, and includes immaterial profits or losses.

Severance expenses for the years

ended June 30, 2020, 2019 and 2018 were $604, $632 and $822, respectively.

deposited funds include profits or losses accumulated up to the balance sheet date.

The deposited funds may be withdrawn only upon the

fulfillment of the obligation pursuant to the Severance Pay Law or labor agreements.

The value of the deposited funds is based on the

cash surrendered value of these policies, and includes immaterial profits or losses.

Severance expenses for the years ended June 30, 2021

and 2020 were $ 748 and $ 604 , respectively.

Fair value of financial instruments

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

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

approximate fair value because of their generally short term maturities.

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

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

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

because of their generally short term maturities.

measures its derivative instruments at fair value under ASC 820, “Fair Value Measurement” (“ASC 820”).

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.

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;

2 - Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly;

3 - Unobservable inputs for the asset or liability.

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 (see

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:

Level 1 - Quoted

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

Level 2 - Inputs

other than Level 1 that are observable for the asset or liability, either directly or indirectly;

Level 3 - Unobservable

inputs for the asset or liability.

The fair value

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

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

measures its liability pursuant to the Finance Contract with the EIB based on the aggregate outstanding amount of the combined principal

and accrued interest.

The Company does not reflect its liability for future royalty payments pursuant to the Finance Contract with the

EIB since the royalty payments are to be paid as a percentage of the Company’s future consolidated revenues, pro-rated to the amount

disbursed, beginning in the fiscal year 2024 and continuing up to and including its fiscal year 2030, which cannot be measured at this

Derivative financial instruments

accounts for derivatives and hedging based on ASC 815, “Derivatives and hedging”, as amended and related interpretations.

The Company accounts

for derivatives and hedging based on ASC 815, “Derivatives and hedging”, as amended and related interpretations (“ASC

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).

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.

Cash flows related to Company’s current

hedging are classified as operating activities.

The Company enters into 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 SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT ACCOUNTING

POLICIES (CONT.)

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 June 30, 2020,

the fair value of the options contracts was approximately $67 and is presented in “other current assets”

The net gains (losses) recognized in “Financial income, net”

during the years ended June 30, 2020, 2019 and 2018,

were $13, $(105) and $(264), respectively.

Comprehensive loss:

The Company accounts for comprehensive

income (loss) in accordance with ASC 220, “Comprehensive Income”.

Comprehensive income generally represents all changes

in stockholders’

equity during the period except those resulting from investments by, or distributions to, stockholders’.

The Company determined that its items of other comprehensive income (loss) relate to unrealized gains and losses on available for

sale marketable securities.

Reclassifications:

Certain financial statement

data for prior years have been reclassified to conform to current year financial statement presentation.

Recently Adopted Accounting Pronouncement

Standards Update (“ASU”) No.

2016-02 - “Leases”

(“Topic 842”) and ASU No.

2018-11, “Targeted

Improvements - Leases”

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.

The provisions of

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

The Company adopted the

new standard as of July 1, 2019, using the modified retrospective approach.

Consequently, prior period balances and

disclosures have not been restated.

The Company has elected to utilize the available package of practical expedients

permitted under the transition guidance within the new standard which does not require it to reassess the prior conclusions

about lease identification, lease classification and initial direct costs.

The adoption of Topic 842 resulted in the

elimination of deferred participation payments 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.

For additional

information regarding the Company’s accounting for leases, please refer to Note 7.

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 SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT ACCOUNTING

POLICIES (CONT.)

2018-07 - “Compensation—Stock Compensation”

(Topic 718) (“ASU No.

2018-07”):

In June 2018, the FASB issued

The ASU expands the scope of ASU No.

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).

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

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”

(“ASU No.

2017-12”):

In August 2017, the FASB issued

2017-12, which is intended to simplify and amend the application of hedge accounting to more clearly portray the economics

of an entity’s risk management strategies in its financial statements.

The ASU will make more financial and nonfinancial

hedging strategies eligible for hedge accounting, reduce complexity in fair value hedges of interest rate risk and ease certain

documentation and assessment requirements of hedge effectiveness.

It also changes how companies assess effectiveness of the hedge

and amends the presentation and disclosure requirements relating to hedging activities.

ASU 2017-12 is effective for

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

The Company adopted the new standard as of July

1, 2019 and the standard had no impact on the Company’s consolidated financial statements.

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

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 June 30, 2021 and 2020, the fair

value of the options contracts was immaterial and is presented in “other current assets” (see Note 3).

The net gains (losses)

recognized in “Financial income, net” during the years ended June 30, 2021 and 2020, were $ 35 and $ 13 , respectively.

Operating leases

are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability.

ROU assets represent

Company’s right to use an underlying asset for the lease term and lease liabilities represent obligation to make lease payments arising

from the lease.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of

lease payments over the lease term.

In determining the present value of lease payments, the Company uses the incremental borrowing rate

based on the information available at the lease commencement date as the rate implicit in the lease is not readily determinable.

The determination

of the incremental borrowing rate requires management judgment based on information available at lease commencement.

The operating lease

ROU assets also include adjustments for prepayments, accrued lease payments and exclude lease incentives.

Lease terms may include options

to terminate the lease when it is reasonably certain that such options will be exercise.

Operating lease cost is recognized on a straight-line

basis over the expected lease term.

Lease agreements entered into after the adoption of ASC 842, “Leases” that include lease

and non-lease components are accounted for as a single lease component.

Lease agreements with a noncancelable term of less than 12 months

are not recorded on the balance sheets.

Loss contingencies

The Company may become involved, from

time to time, in various lawsuits and legal proceedings which arise in the ordinary course of business.

The Company records accruals for

loss contingencies to the extent that it concludes their occurrence is probable and that the related liabilities are estimable.

Recently Issued Accounting Pronouncements

2018-18 - “Collaborative Arrangements (Topic 808) - Clarifying the Interaction between Topic 808 and Topic 606”

(“ASU No.

2018-18”):

In November 2018, the FASB

issued ASU No.

2018-18, which clarifies the interaction between Topic 808 and Topic 606 by (1) clarifying that certain transactions

between collaborative arrangement participants should be accounted for under Topic 606, (2) adding unit-of-account guidance in

Topic 808 to align with the guidance in Topic 606, and (3) clarifying presentation guidance for transactions with a collaborative

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 consolidated

financial statements.

2016-13 -, “Financial Instruments - Credit Losses (Topic 326)

In September 2016, the FASB

issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”

(“ASU 2016-13”).

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use

a new forward-looking “expected loss”

model that generally will result in the earlier recognition of allowances for

2016-13 - “Financial

Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”):

June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit

Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”).

ASU 2016-13 changes

the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt

securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model

that generally will result in the earlier recognition of allowances for losses.

The guidance also requires increased disclosures.

The amendments contained in ASU 2016-13 were originally effective for fiscal years beginning after December 15, 2019, including

interim periods within those fiscal years for the Company.

In November 2019, the FASB issued ASU No.

2019-10, which

delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S.

Securities and Exchange

Commission, “SRC”) to fiscal years beginning after December 15, 2022, including interim periods.

Early adoption is

The Company meets the definition of an SRC and is adopting the deferral period for ASU 2016-13.

requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the

beginning of the period of adoption.

The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its

consolidated financial statements but does not expect that the adoption of this standard will have a material impact on its

consolidated financial statements.

Comprehensive loss

For all periods presented, loss is

the same as comprehensive loss as there are no comprehensive income items.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT ACCOUNTING

POLICIES (CONT.)

For the Company, the amendments

in the update were originally effective for fiscal years beginning after December 15, 2019, including interim periods within those

fiscal years.

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

2019-10 -, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)

In November 2019, the FASB issued ASU No.

2019-10 which delayed

the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S.

Securities and Exchange Commission (the

“SEC”)) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, or July 1, 2023 for

the Company, including interim periods within those fiscal periods.

Early adoption is permitted.

The Company is currently evaluating

the impact of adopting the ASU on its consolidated financial statements.

NOTE 3:- MARKETABLE SECURITIES

The Company has invested in highly-rated

When evaluating the investments for other-than-temporary impairment, the Company has reviewed factors such as the length

of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto,

and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before

recovery of the investment’s amortized cost basis.

The Company recognized other-than-temporary

impairment loss on outstanding securities during the year ended June 30, 2018 of $850.

The Company did not recognize any other-than-temporary

impairment loss on outstanding securities during the year ended June 30, 2020 and 2019.

During the year ended June 30, 2018, the Company sold marketable

securities for aggregate net proceeds (including redemptions) of approximately $21,890, representing a net gain of $8,440.

proceeds from the sale of such marketable securities are included in “Financial income, net”, for the year ended June

NOTE 4:- OTHER CURRENT ASSETS

- PREPAID EXPENSES AND OTHER CURRENT ASSETS

Accounts receivable from the Horizon 2020 grants

5 unchanged sentences

Other receivables

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 5:- PROPERTY AND EQUIPMENT,

- PROPERTY AND EQUIPMENT, NET

Laboratory equipment

9 unchanged sentences

Property and equipment, net

Depreciation expenses amounted to $1,570, $1,962 and

$2,018, for the years ended June 30, 2020, 2019 and 2018, respectively.

During the fiscal years ended

June 30, 2020 and 2019, the Company recorded a reduction of $ 74 and $9, respectively, to the cost accumulated depreciation of

fully depreciated equipment no longer in use.

NOTE 6:- OTHER ACCOUNTS

Accrued vacation

Deferred income from the nTRACK Horizon 2020 grant

Accrued payroll

Payroll institutions

Other payables

Depreciation expenses amounted to $ 1,370

and $ 1,570 for the years ended June 30, 2021 and 2020, respectively.

During the fiscal years ended June 30,

2021 and 2020, the Company recorded a reduction of $ 0 and $ 74 , respectively, to the cost accumulated depreciation of fully depreciated

equipment no longer in use.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 7:- LEASES

The right-of-use asset and

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.

The Company has various operating leases for office

space and vehicles that expire through 2023.

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

as of June 30, 2020:

- OTHER ACCOUNTS

Accrued vacation and recuperation

Deferred income from the Horizon 2020 grant and CRISPR-IL

Accrued payroll

Payroll institutions

The Company has

various operating leases for office space that expire through fiscal 2022 and vehicles that expire through fiscal 2025.

Below is a summary

of the Company’s operating right-of-use assets and operating lease liabilities as of June 30, 2021:

Operating right-of-use assets

2 unchanged sentences

Total operating lease liabilities

The operating lease right-of-use assets are presented

in long term assets net after elimination of deferred participation payments from Matam High-Tech and Business Park of $240 and

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

Minimum lease payments for the Company’s right-of-use

(“ROU”) assets over the remaining lease periods as of June 30, 2020 are as follows:

Minimum lease payments for the Company’s ROU assets

over the remaining lease periods as of June 30, 2021 are as follows:

Total undiscounted lease payments

Present value of lease liabilities

The components of lease expense and supplemental cash

flow information related to leases for the year ended June 30, 2020 were as follows:

PLURISTEM THERAPEUTICS INC.

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- LEASES (CONT.)

The components of lease expense and supplemental cash flow

information related to leases for the year ended June 30, 2021 were as follows:

Year ended June 30,

Components of lease expense

Operating lease cost

Operating lease cost, net *

Sublease income

2 unchanged sentences

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

* The operating lease costs are presented net after elimination

of deferred participation payments in amount of $ 248 .

As of June 30, 2021,

the weighted average remaining lease term is 1.2 years, and the weighted average discount rate is 10 percent.

The discount rate was determined

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

- LOAN FROM THE EIB

30, 2020, Pluristem entered into a finance contract (the “Finance Contract”) with the

EIB, pursuant to which Pluristem, through the German Subsidiary can obtain a loan in the amount of up to € 50 million, subject to

certain milestones being reached (the “Loan”), payable in three tranches, with the first tranche consisting of € 20 million,

second of € 18 million and third of € 12 million for a period of 36 months from the signing of the Finance Contract.

The tranches will be treated independently,

each with its own interest rate and maturity period.

The interest rate is 4 % in the aggregate (consisting of a 0 % fixed interest rate

and a 4 % deferred interest rate payable upon maturity, respectively) per year for the first tranche, 4 % in the aggregate (consisting of

a 1 % fixed interest rate and a 3 % deferred interest rate payable upon maturity, respectively) per year for the second tranche and 3 % (consisting

of a 1 % fixed interest rate and a 2 % deferred interest rate payable upon maturity, respectively) per year for the third tranche.

In addition to any interest

payable on the Loan, the EIB is entitled to receive royalties from future revenues, if any, of Pluristem for a period of seven years

starting in 2024, in an amount equal to between 0.2 % to 2.3 % of the Company’s consolidated revenues, pro-rated to the amount

disbursed from the Loan to Pluristem beginning in the fiscal year 2024 and continuing up to and including its fiscal year 2030.

During June 2021, Pluristem received

the first tranche in an amount of $ 24,449 (€ 20 million) of the Finance Contract.

The amount received is due on June 1, 2026 and bears

annual interest of 4 % to be paid with the principal of the Loan.

As of June 30, 2021, the linked principal balance in the amount of $ 23,772

and the interest accrued in the amount of $ 78 are presented as part of the Loan at long term liabilities (See also note 8h).

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 7:- LEASES (CONT.)

As of June 30, 2020, the weighted average

remaining lease term is 1.7 years, and the weighted average discount rate is 10 percent.

The discount rate was determined based

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

As of June 30, 2020, the aggregate minimum

lease commitments under the active operating lease agreements are $ 1,706.

As of June 30, 2019, the aggregate minimum

lease commitments under the active operating lease agreements are $2,641.

NOTE 8:- COMMITMENTS AND

CONTINGENCIES

An amount of $555 of cash and deposits was pledged by the

Subsidiary to secure certain derivatives and hedging transactions, a credit line and bank guarantees as of June 30, 2020.

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

Law generally provide for the payment of royalties to the IIA of 3% on sales of products and services derived from a technology

developed using these grants until 100% of the dollar-linked grant is repaid.

The Company’s obligation to pay these royalties

is contingent on its actual sale of such products and services.

- COMMITMENTS AND CONTINGENCIES

As of June 30, 2021, an amount of $ 597 of cash and deposits was

pledged by the Subsidiary to secure its 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 Law generally provide

for the payment of royalties to the IIA of 3 % on sales of products and services derived from a technology developed using these grants

until 100 % of the dollar-linked grant is repaid.

The Company’s obligation to pay these royalties is contingent on its actual sale

of such products and services.

In the absence of such sales, no payment is required.

balance of the grants will be subject to interest at a rate equal to the 12 month LIBOR applicable to dollar deposits that is

published on the first business day of each calendar year.

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

for royalties.

Through June 30, 2020, total

grants obtained aggregated to approximately $27,685 and total royalties paid and accrued amounted to $169.

As of June 30, 2020,

the Company’s liability in respect to royalties to the IIA amounted to $27,516, not including LIBOR interest as described

The Company has been awarded a marketing grant under the

“Smart Money”

program of the Israeli Ministry of Economy and Industry.

The program’s aim is to assist companies

to extend their activities in international markets.

Outstanding balance of the grants will be subject

to interest at a rate equal to the 12 month LIBOR applicable to dollar deposits that is published on the first business day of each calendar

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

Through June 30, 2021, total grants

obtained aggregated to approximately $ 27,743 and total royalties paid and accrued amounted to $ 169 .

As of June 30, 2021, the Company’s

contingent liability in respect to royalties to the IIA amounted to $ 27,574 , not including LIBOR interest as described above.

The Company has been awarded a marketing

grant under the “Smart Money” program of 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.

The Israeli government granted

the Company budget resources that are intended to be used to advance the Company’s product candidate towards marketing in

Japan and for regulatory activities there.

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

income in Japan during five years, starting 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 June 30, 2020, total

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

As of June 30, 2020, the Company’s contingent

liability with respect to royalties for this “Smart Money”

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

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 8:- COMMITMENTS AND

CONTINGENCIES (CONT.)

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.

the Company budget resources that are intended to be used to advance the Company’s product candidate towards marketing in Japan

and for regulatory activities there.

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

Japan during five years, starting 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 June 30, 2021, total grants

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

As of June 30, 2021, 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.

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 markets.

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.

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 June 30, 2020, the aggregate

amount of grant obtained from this Smart Money program was approximately $129.

As of June 30, 2020, the Company’s contingent

liability with respect to royalties for this “Smart Money”

program is $129 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 (“

cGVHD ”).

As part of the agreement

with the Tel-Aviv Sourasky Medical Center (Ichilov Hospital), the Company will pay royalties of 1% from its net sales of the PLX-PAD

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

In July 2018, 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 in the U.S.

As part of the program, the Company will repay royalties of 3%, but only with respect to the Company’s

revenues in the U.S.

market in excess of $250 of its revenues in fiscal year 2018, upon the earlier of the five year period beginning

the year in which the Company will not be entitled to reimbursement of expenses under the program and/or until the amount of the

grant, which is linked to the Consumer Price Index, is fully paid.

As of June 30, 2020, total

grants obtained under the “Shalav”

program amounted to approximately $49.

As of June 30, 2020, the Company’s

contingent liability with respect to royalties for the “Shalav”

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

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.

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

As of June 30, 2021, the aggregate amount of grant obtained from

this Smart Money program was approximately $ 160 .

As of June 30, 2021, the Company’s contingent liability with respect to royalties for

this “Smart Money” program is $ 160 and no royalties were paid or accrued.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 9:- STOCKHOLDERS’

The Company’s authorized

common stock consists of 60,000,000 shares with a par value of $0.00001 per share.

All shares have equal voting rights and are

entitled to one vote per share in all matters to be voted upon by stockholders.

The shares have no pre-emptive, subscription, conversion

or redemption rights and may be issued only as fully paid and non-assessable shares.

Holders of the common stock are entitled to

equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by the Board of Directors

out of funds legally available.

The Company’s authorized preferred stock consists of 1,000,000 shares of preferred stock,

par value $0.00001 per share, with series, rights, preferences, privileges and restrictions as may be designated from time to time

by the Company’s Board of Directors.

No shares of preferred stock have been issued.

Reverse stock split:

- COMMITMENTS AND CONTINGENCIES (CONT.)

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 (“ cGVHD ”).

of the agreement with the Tel-Aviv Sourasky Medical Center (Ichilov Hospital), the Company will pay royalties of 1 % from its net sales

of the PLX-PAD product relating to cGVHD , with a maximum aggregate royalty amount of approximately

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 in the U.S.

the program, the Company will repay royalties of 3 %, but only with respect to the Company’s revenues in the U.S.

market in excess of $ 250

of its revenues in fiscal year 2018, upon the earlier of the five year period beginning the year in which the Company will not be entitled

to reimbursement of expenses under the program and/or until the amount of the grant, which is linked to the Consumer Price Index, is fully

As of June 30, 2021, total grants obtained

under the “Shalav” program amounted to approximately $ 52 .

As of June 30, 2021, the Company’s contingent liability with respect

to royalties for the “Shalav” program was $ 52 and no royalties were paid or accrued.

On April 30, 2020, Pluristem entered into the Finance Contract

with the EIB, pursuant to which the German Subsidiary can obtain the Loan in the amount of up to € 50 million, subject to certain

milestones being reached, payable in three tranches.

The first tranche in amount of $ 23,772 (€ 20 million) was received during June

The EIB is entitled to receive royalties

from future revenues, if any, of Pluristem for a period of seven years starting in 2024, in an amount equal to between 0.2 % to 2.3 % of

the Company’s consolidated revenues, pro-rated to the amount disbursed from the Loan to Pluristem beginning in the fiscal year 2024

and continuing up to and including its fiscal year 2030.

- SHAREHOLDERS’ EQUITY

(1) The Company’s authorized common shares consist of 60,000,000 shares

with a par value of $ 0.00001 per share.

All shares have equal voting rights and are entitled to one vote per share in all matters to

be voted upon by shareholders.

The shares have no pre-emptive, subscription, conversion or redemption rights and may be issued only as

fully paid and non-assessable shares.

Holders of the common shares are entitled to equal ratable rights to dividends and distributions

with respect to the common share, as may be declared by the Board of Directors out of funds legally available.

The Company’s authorized

preferred shares consist of 1,000,000 shares of preferred share, par value $ 0.00001 per share, with series, rights, preferences, privileges

and restrictions as may be designated from time to time by the Company’s Board of Directors.

No preferred shares have

PLURISTEM THERAPEUTICS INC.

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SHAREHOLDERS’ EQUITY (CONT.)

Reverse share split:

In July 2019, the Board of 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.

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

(b) issued and outstanding common shares and (c)

authorized preferred shares.

The reverse split became effective on July 25, 2019.

stock split will not have any effect on the stated par value of the common stock.

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.

In the year ended June 30, 2018, a total of 828,703 warrants from a January 2017 offering were

exercised by investors at an exercise price of $14.00 per share, resulting in the issuance of 82,871 shares of common stock for

net proceeds of approximately $1,160.

In July 2017, pursuant to a shelf registration statement on Form S-3, declared effective by the

SEC on June 23, 2017, the Company entered into an At Market Issuance Sales Agreement (the “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

During the year ended June 30, 2018, the Company sold 359,941 shares of common stock under the ATM Agreement at an average

price of $14.30 per share for aggregate proceeds of approximately $4,985, net of issuance expenses of $174.

During the year ended

June 30, 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 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.

On October 31, 2017, the Company completed a public offering in Israel, pursuant to the Company’s

existing shelf registration statement on Form S-3 in the United States and a shelf registration statement filed in Israel, pursuant

to which the Company raised aggregate gross proceeds of $15,051 through the sale of 900,000 shares of the Company’s common

stock at a purchase price of NIS 59 (approximately $16.70) per share.

The net proceeds, after deducting fees and expenses related

to the offering, were approximately $13,646.

The reverse share split did not have any effect on the

stated par value of the common shares.

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

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

Pursuant to a shelf registration on Form S-3 declared effective by the Securities and Exchange Commission on June 23, 2017, on February 6, 2019, the Company entered into the Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC (“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 common shares having an aggregate offering price of up to $ 50,000 through Jefferies acting as sales agent.

During the year ended June 30, 2019, the Company sold 236,800 common shares under the Sales Agreement at an average price of $ 9.70 per share for aggregate net proceeds of approximately $ 2,051 , net of issuance expenses of $ 255 .

During the year ended June 30, 2020,

the Company sold 8,060,950 common shares under the Sales Agreement at an average price of $ 5.81 per share for aggregate net proceeds of

approximately $ 43,262 , net of issuance expenses of $ 3,573 .

On June 30, 2020, this shelf registration

statement on Form S-3 expired, and as a result thereof, the Sales Agreement was terminated.

During the year ended June 30, 2020, a total of 386,678 warrants

to purchase shares from the April 2019 offering were exercised by investors at an exercise price of $ 7.00 per share, resulting in the

issuance of 386,678 common shares for net proceeds of approximately $ 2,707 .

On May 5, 2020, the Company entered into a securities purchase

agreement with two institutional investors (the “Investors”) pursuant to which the Company sold, in a registered public offering

directly to the Investors, 1,587,302 common shares for net proceeds of approximately $ 14,901 .

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

by the SEC on July 23, 2020, in July 2020 the Company entered into a new Open Market Sale Agreement (“ATM Agreement”) with

Jefferies, 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 common shares having an aggregate offering price of up to $ 75,000 through Jefferies acting as sales

During the year ended June 30, 2021, the Company sold 1,045,097 common shares under the ATM Agreement at an average price of $ 8.50

per share for aggregate net proceeds of approximately $ 8,506 , net of issuance expenses of $ 380 .

During the year ended June 30, 2021,

a total of 519,990 warrants to purchase common shares from the April 2019 offering were exercised

by investors at an exercise price of $ 7.00 per share, resulting in the issuance of 51,999 common shares for net proceeds of approximately

On February 2, 2021, the Company, entered into a securities purchase

agreement, with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering,

by the Company directly to the investors, 4,761,905 common shares for gross proceeds of $ 30,000 .

The aggregate net proceeds were approximately

$ 28,077 , net of issuance expenses of $ 1,923 .

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 9:- STOCKHOLDERS’

- SHAREHOLDERS’

EQUITY (CONT.)

Pursuant to a shelf registration on Form S-3 declared effective by the SEC on June 23, 2017, on

February 6, 2019, the Company entered into the Open Market Sale Agreement SM (the “Sales Agreement”) with

Jefferies LLC (“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 year ended June 30, 2019, the Company sold 236,800 shares

of common stock under the Sales Agreement at an average price of $9.70 per share for aggregate net proceeds of approximately $2,051,

net of issuance expenses of $255.

During the year ended June 30,

2020, the Company sold 8,060,950 shares of common stock under the Sales Agreement at an average price of $5.81 per share for aggregate

net proceeds of approximately $43,262, net of issuance expenses of $3,573.

On June 30, 2020, the shelf registration

statement on Form S-3 declared effective by the SEC on June 23, 2017expired , and as a result thereof, the Sales Agreement was

On April 8, 2019, the Company sold, pursuant to an underwriting agreement relating to a firm commitment

public offering (the “Public Offering”), an aggregate of 2,857,143 shares of common stock and warrants to purchase

2,857,143 shares of common stock, inclusive of the underwriter’s over-allotment option which was exercised in full, for aggregate

gross proceeds of $20,000.

The warrants issued in the Public

Offering are exercisable for a period of five years from issuance and have an exercise price of $7.00 per share.

In addition, on

April 8, 2019, the Company sold, pursuant to a subscription agreement with a certain investor in a registered direct offering (the

“Registered Direct Offering”), 142,857 shares of common stock, for aggregate gross proceeds of $1,000.

The net proceeds

from the Public Offering and the Registered Direct Offering, after deducting underwriting commissions and discounts and other expenses

related to the offerings, were $19,464.

As of June 30, 2020, 2,470,465

warrants to purchase share of our common stock are outstanding.

In the year ended June 30, 2020, a total of 386,678 warrants to purchase shares from the April

2019 offering were exercised by investors at an exercise price of $7.00 per share, resulting in the issuance of 386,678 shares

of common stock for net proceeds of approximately $2,707.

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

investors (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 $14,901.

Stock options, RS and RSUs to employees, directors and consultants:

Share options, RS and RSUs to employees, directors and consultants:

The Company adopted, after

receiving stockholder approval, the 2005 Stock Option Plan in 2005 (the “2005 Plan”).

Under the 2005 Plan, stock options,

RS and RSUs were granted to the Company’s officers, directors, employees and consultants.

The 2005 Plan expired on December

The Company adopted, after receiving stockholder approval, the 2016 Equity Incentive Plan in 2016 (the “2016 Plan”).

Under the 2016 Plan, stock options, RS and RSUs may be granted to the Company’s officers, directors, employees and consultants

or the officers, directors, employees and consultants of our Subsidiaries.

In addition, at the Company’s annual meeting of

its stockholders, held on June 13, 2019, the Company’s stockholders approved the 2019 Equity Compensation Plan (the “2019

Plan”).

receiving shareholder approval, the 2005 Share Option Plan in 2005 (the “2005 Plan”).

Under the 2005 Plan, share

options, RS and RSUs were granted to the Company’s officers, directors, employees and consultants.

The 2005 Plan expired on

December 31, 2018.

The Company adopted, after receiving shareholder approval, the 2016 Equity Incentive Plan in 2016 (the

“2016 Plan”).

Under the 2016 Plan, share options, RS and RSUs may be granted to the Company’s officers, directors,

employees and consultants or the officers, directors, employees and consultants of the Subsidiaries.

In addition, at

the Company’s annual meeting of its shareholders, held on June 13, 2019, the Company’s shareholders approved the 2019

Equity Compensation Plan (the “2019 Plan”).

Under the 2019 Plan, share options,

RS and RSUs may be granted to the Company’s officers, directors, employees and consultants or the officers, directors, employees

and consultants of the Subsidiary.

As of June 30, 2021, the number of common

shares authorized for issuance under the 2016 Plan amounted to 879,945 for calendar year 2021, of which 859,945 are available for future

grant during calendar year 2021 under the 2016 Plan.

As of June 30, 2021, the number of common shares authorized for issuance under the

2019 Plan amounted to 3,783,807, all of which are available for future grant under the 2019 Plan.

to consultants:

A summary of the share options to non-employee

consultants under the 2005 Plan and 2016 Plan is as follows:

Year ended June 30, 2020

Share options outstanding at beginning of period

Share options granted

Share options exercised

Share options forfeited

Share options outstanding at end of the period

Share options exercisable at the end of the period

Share options vested and expected to vest at the end of the period

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 9:- STOCKHOLDERS’

EQUITY (CONT.)

Under the 2019 Plan, stock

options, RS and RSUs may be granted to the Company’s officers, directors, employees and consultants or the officers, directors,

employees and consultants of the Subsidiary.

As of June 30, 2020, the number

of shares of common stock authorized for issuance under the 2016 Plan amounted to 595,694 for calendar year 2020, of which 584,144

are available for future grant during calendar year 2020 under the 2016 Plan.

As of June 30, 2020, the number of shares of common

stock authorized for issuance under the 2019 Plan amounted to 4,672,243, all of which are available for future grant under the

Options to non-employees:

A summary of the stock options to

non-employee consultants under the 2005 Plan and 2016 Plan is as follows:

- SHAREHOLDERS’ EQUITY (CONT.)

Year ended June 30, 2021

Weighted Average Exercise Price

Weighted Average Remaining Contractual Terms

Aggregate Intrinsic Value Price

Stock options outstanding at beginning of period

Stock options granted

Stock options exercised

Stock options forfeited

Stock options outstanding at end of the period

Stock options exercisable at the end of the period

Stock options vested and expected to vest at the end of the period

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

Share options outstanding at beginning of period

Share options granted

Share options exercised

Share options forfeited

Share options outstanding at end of the period

Share options exercisable at the end of the period

Share options unvested

Share options vested and expected to vest at the end of the period

Compensation expenses

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

Year ended June 30,

1 unchanged sentence

General and administrative expenses

and RSUs to employees and directors:

The following table

summarizes the activity related to unvested RS and RSUs granted to employees and directors under the 2005 Plan, 2016 Plan and 2019 Plan

for the years ended June 30, 2021 and 2020:

Year ended June 30,

Unvested at the beginning of period

Unvested at the end of the period

Expected to vest after the end of period

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 9:- STOCKHOLDERS’

- SHAREHOLDERS’

EQUITY (CONT.)

RS and RSUs to employees and directors:

The following

table summarizes the activity related to unvested RS and RSUs granted to employees and directors under the 2005 Plan and 2016 Plan

for the year ended June 30, 2020:

Unvested at the beginning of period

Unvested at the end of the period

Expected to vest after June 30, 2020

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

Compensation expenses

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

Year ended June 30,

2 unchanged sentences

Unamortized compensation expenses

related to RS and RSUs granted to employees and directors to be recognized over an average time of approximately 2.75 years are

approximately $1,194.

RS and RSUs to consultants:

The following

table summarizes the activity related to unvested RS and RSUs granted to consultants for the year ended June 30, 2020:

Unvested at the beginning of period

Unvested at the end of the period

related to RSUs granted to employees and directors is approximately $ 10,174 to be recognized by the end of March 2025.

Market-based awards

In September 2020, the Company granted

two of its executive officers an aggregate of 1,000,0000 RSUs (500,000 each) under the 2019 Plan.

The RSUs will vest in full upon

the achievement of a milestone of the Company increasing the market capitalization of its common shares on the Nasdaq

Global Market to $ 550,000 within no more than three years from the date of grant.

For market-based awards, the Company

determines the grant-date fair value utilizing a Monte Carlo simulation model, which incorporates various assumptions including expected

share price volatility, risk-free interest rates, and the expected date of a qualifying event.

The Company estimates the volatility of

the common shares based on its historical share price volatility for a period of 4 years from the grant date based on the daily changes

in the share price.

The risk-free interest rate is based on the zero-coupon yield of U.S.

Treasury bonds for the expiration date of the

The fair value

of the market-based award uses the assumptions noted in the following table:

Risk-free interest rates

Dividend yield

Expected volatility

The Company recognizes

compensation expenses for the value of its market-based awards based on the results of the Monte Carlo valuation model.

value of the market-based awards granted on the grant date was $ 7.28 per share and the expected time for the market condition to

achieve, based on the Monte Carlo valuation model, is thirteen and a half months from the date of the grant.

As of June 30, 2021,

the Company recognized $ 5,156 of expenses included in general and administrative expenses.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

9:- STOCKHOLDERS’

- SHAREHOLDERS’

EQUITY (CONT.)

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

to consultants:

The following table

summarizes the activity related to unvested RS and RSUs granted to consultants for the years ended June 30, 2021 and 2020:

Year ended June 30,

Unvested at the beginning of period

Unvested at the end of the period

Compensation expenses

related to RSUs granted to consultants were recorded as follows:

Year ended June 30,

Research and development expenses

1 unchanged sentence

Summary of warrants and options:

Exercise Price per Share

Options and Warrants for Common Stock

Options and Warrants Exercisable for Common Stock

Weighted Average Remaining Contractual Terms

Warrants / Options

Total warrants

1 unchanged sentence

Total warrants and options

This summary does not include 421,444 RS and

RSUs that are not vested as of June 30, 2020.

NOTE 10:- OTHER INCOME

In December 2017, the Subsidiary

was awarded approximately $43 (NIS 150 thousand) by the Israeli Ministry of Labor, Social Affairs and Social Services related to

its “Equal Employment”

program which aims to reward and honor Israeli employers who demonstrate and promote gender

equality in employment.

This summary does not include 2,480,664 RSUs that are not vested as

of June 30, 2021.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

NOTE 11:- FINANCIAL

- FINANCIAL INCOME, NET

Year ended June 30,

2 unchanged sentences

Interest income on deposits

Interest expenses due to implementation of new accounting standards “Leases”

Gain related to marketable securities, net

Other than temporary impairment loss

Gain (loss) from derivatives and fair value hedge derivatives

Other financial expense

NOTE 12:- TAXES ON INCOME

Gain from derivatives and fair value hedge derivatives

EIB loan interest expenses

- TAXES ON INCOME

Tax rates applicable to the Company:

Pluristem Therapeutics:

federal tax rate applicable to Pluristem Therapeutics is the corporate federal tax rate of 21%, which is the result of the Tax

Cuts and Jobs Act of 2017 (the “Tax Act”).

Such corporate tax rate excludes state tax and local tax, if any, which

rates depend on the state and city in which Pluristem Therapeutics conducts its business.

On December 22, 2017, the Tax

Act was signed into law in the United States, lowering the corporate federal income tax rate from 35% to 21%, effective January

The Tax Act provided for a

one-time transition tax on certain foreign earnings for the tax year 2017, and taxation of Global Intangible Low-Taxed Income (“GILTI”)

earned by foreign subsidiaries beginning after December 31, 2017.

The GILTI tax imposes a tax on foreign income in excess of a

deemed return on tangible assets of foreign corporations.

The Tax Act also makes certain changes to the depreciation rules and

implements new limits on the deductibility of certain executive compensation paid by Pluristem Therapeutics.

Finally, while the

Tax Act removes the 20 year limitation on net operating losses generated after December 31, 2017, all losses generated after December

31, 2017 can only be used to offset 80% of net income in the year they will be utilized.

PLURISTEM THERAPEUTICS INC.

tax rate applicable to Pluristem Therapeutics is the corporate federal tax rate of 21 %, which is the result of the Tax Cuts and Jobs Act

of 2017 (the “Tax Act”).

Such corporate tax rate excludes state tax and local tax, if any, which rates depend on the state and

city in which Pluristem Therapeutics conducts its business.

On December 22, 2017, the Tax Act

was signed into law in the United States, lowering the corporate federal income tax rate from 35 % to 21 %, effective January 1, 2018.

The Tax Act provided for a one-time

transition tax on certain foreign earnings for the tax year 2017, and taxation of Global Intangible Low-Taxed Income (“GILTI”)

earned by foreign subsidiaries beginning after

December 31, 2017.

The GILTI tax imposes

a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

The Tax Act also makes certain changes

to the depreciation rules and implements new limits on the deductibility of certain executive compensation paid by Pluristem Therapeutics.

Finally, while the Tax Act removes the 20 year limitation on net operating losses generated after December 31, 2017, all losses generated

after December 31, 2017 can only be used to offset 80 % of net income in the year they will be utilized.

This re-measurement was fully offset

by a valuation allowance, resulting in no impact to the Company’s income tax expense for the fiscal year ended June 30, 2021.

a result, the Company’s financial results reflect in the income tax effects of the Tax Act, for which the accounting under ASC 740 is

There was no one-time transition tax

for the Company under the Tax Act, nor will there be GILTI tax due for the current year, since the Subsidiary had losses for every year

In January 2018, Pluristem Therapeutics

registered as an Israeli resident with the Israel Tax Authority (the “ITA”) and the Israeli Value Added Tax Authorities.

a result, as of such date, Pluristem Therapeutics is classified as a dual resident for tax purposes, as a resident in both Israel and

the United States.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 12:- TAXES ON INCOME

re-measurement was fully offset by a valuation allowance, resulting in no impact to the Company’s income tax expense for

the fiscal year ended June 30, 2020.

As a result, the Company’s financial results reflect in the income tax effects of the

Tax Act, for which the accounting under ASC 740 is complete.

There was no one-time transition

tax for the Company under the Tax Act, nor will there be GILTI tax due for the current year, since the Subsidiary had losses for

every year to date.

In January 2018, Pluristem

Therapeutics registered as an Israeli resident with the Israel Tax Authority (the “ITA”) and the Israeli Value Added

Tax Authorities.

As a result, as of such date, Pluristem Therapeutics is classified as a dual resident for tax purposes, as a resident

in both Israel and the United States.

In June 2018, Pluristem Therapeutics

and the Subsidiary submitted an election notice to the ITA to file a consolidated tax return in Israel commencing with the 2018

The Subsidiary:

Taxable income of Israeli companies

is subject to tax at the rate of 23% in 2020, 2019 and 2018.

The Subsidiary is filing its

tax reports in dollars based on specific regulations of the ITA which allow, in specific circumstances, filing tax reports in dollars

(“Dollar Regulations”).

Under the Dollar Regulations, the Subsidiary calculates its tax liability in dollars according

to certain orders.

The tax liability, as calculated in dollars, is translated into NIS according to the exchange rate as of June

30 of each year.

The Subsidiary has not received

final tax assessments since its incorporation, however the assessments of the Subsidiary are deemed final through 2014.

for the Encouragement of Capital Investments, 1959 (the “Law”):

The Subsidiary

has programs which meet the criteria of a “Beneficiary Enterprise”, in accordance with the Law, under the Alternative

Benefit Track starting with 2007 as the election year (the “2007 Program”) and 2012 as an election year to the expansion

of its “Beneficiary Enterprise”

program (the “2012 Program”).

2012 Program, the Subsidiary, which was located in the “Other National Priority Zone”

with respect to the year 2012,

would be tax exempt in the first two years of the benefit period and subject to tax at the reduced rate of 10%-25% for a period

of five to eight years for the remaining benefit period (dependent on the level of foreign investments).

of expansion programs pursuant to Amendment No.

60 to the Law, the duration of the benefit period has been amended, such that it

starts at the later of the election year and the first year the Company earns taxable income provided that 12 years have not passed

since the beginning of the election year and for companies in National Priority Zone A - 14 years have not passed since the beginning

of the election year.

PLURISTEM THERAPEUTICS INC.

- TAXES ON INCOME (CONT.)

June 2018, Pluristem Therapeutics and the Subsidiary submitted an election notice to the ITA to file a consolidated tax return in Israel

commencing with the 2018 tax year.

taxable income of Pluristem Therapeutics and the Subsidiary (the “Consolidated tax unit”) is subject to tax at the rate of

23 % in 2021 and 2020.

Consolidated tax unit is filing its consolidated tax reports in dollars based on specific regulations of the ITA which allow, in specific

circumstances, filing tax reports in dollars (“Dollar Regulations”).

Under the Dollar Regulations, the tax liability is calculated

in dollars according to certain orders.

The tax liability, as calculated in dollars, is translated into NIS according to the exchange

rate as of June 30 of each year.

Subsidiary has not received final tax assessments since its incorporation, however the assessments of the Subsidiary are deemed final

through 2015.

Law for the Encouragement of Capital Investments, 1959 (the “Law”):

Subsidiary has programs which meet the criteria of a “Beneficiary Enterprise”, in accordance with the Law, under the Alternative

Benefit Track starting with 2007 as the election year (the “2007 Program”) and 2012 as an election year to the expansion of

its “Beneficiary Enterprise” program (the “2012 Program”).

the 2012 Program, the Subsidiary, which was located in the “Other National Priority Zone” with respect to the year 2012, would

be tax exempt in the first two years of the benefit period and subject to tax at the reduced rate of 10 %- 25 % for a period of five to

eight years for the remaining benefit period (dependent on the level of foreign investments).

respect of expansion programs pursuant to Amendment No.

60 to the Law, the duration of the benefit period has been amended, such

that it starts at the later of the election year and the first year the Company earns taxable income provided that 12 years have not

passed since the beginning of the election year and for companies in National Priority Zone A - 14 years have not passed since the

beginning of the election year.

benefit period for the Subsidiary’s 2007 Program expired in 2018 (12 years since the beginning of the election year– 2007) and

the benefit period for the Subsidiary’s 2012 Program is expected to expire in 2023 (12 years since the beginning of the election year

a dividend is distributed out of tax exempt profits, as detailed above, the Subsidiary will become liable for taxes at the rate applicable

to its profits from the Beneficiary Enterprise in the year in which the income was earned (tax at the rate of 10-25%, dependent on the

level of foreign investments) and to a withholding tax rate of 15% (or lower, under an applicable tax treaty).

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 12:- TAXES

ON INCOME (CONT.)

period for the Subsidiary’s 2007 Program expired in 2018 (12 years since the beginning of the election year–

and the benefit period for the Subsidiary’s 2012 Program is expected to expire in 2023 (12 years since the beginning of the

election year - 2012).

If a dividend

is distributed out of tax exempt profits, as detailed above, the Subsidiary will become liable for taxes at the rate applicable

to its profits from the Beneficiary Enterprise in the year in which the income was earned (tax at the rate of 10-25%, dependent

on the level of foreign investments) and to a withholding tax rate of 15% (or lower, under an applicable tax treaty).

- TAXES ON INCOME (CONT.)

depreciation:

The Subsidiary

is eligible for deduction of accelerated depreciation on buildings, machinery and equipment used by the “Beneficiary Enterprise”

at a rate of 200% (or 400% for buildings but not more than 20% depreciation per year) from the first year of the assets operation.

Subsidiary is eligible for deduction of accelerated depreciation on buildings, machinery and equipment used by the “Beneficiary

Enterprise” at a rate of 200 % (or 400 % for buildings but not more than 20 % depreciation per year) from the first year of the assets

for the entitlement to the benefits:

mentioned benefits are conditional upon the fulfillment of the conditions stipulated by the Law, regulations promulgated thereunder,

above mentioned benefits are conditional upon the fulfillment of the conditions stipulated by the Law, regulations promulgated thereunder,

and the Ruling with respect to the beneficiary enterprise.

2 unchanged sentences

The management believes that the Subsidiary is meeting the aforementioned

2010, the “Knesset”

(Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation),

2011, which prescribes, among others, amendments in the Law ( “Amendment No.

December 2010, the “Knesset” (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation),

2011, which prescribes, among others, amendments in the Law (“Amendment No.

Amendment No.

68 became effective

as of January 1, 2011.

68 became effective as of

January 1, 2011.

According to Amendment No.

68, the benefit tracks in the Law were modified and a flat tax rate became applicable

to a company for all preferred income under its status as a preferred company with a preferred enterprise.

5, 2013, the Knesset issued the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013

68, the benefit tracks in the Law were modified and a flat tax rate became applicable to

a company for all preferred income under its status as a preferred company with a preferred enterprise.

August 5, 2013, the Knesset issued the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for

2013 and 2014), 2013 which consists of Amendment No.

71 to the Law ( “Amendment No.

71 to the Law (“Amendment No.

According to Amendment No.

the tax rate on preferred income form a preferred enterprise in 2014 and thereafter will be 16% (in development area A it will

71 also prescribes that any dividends distributed to individuals or foreign residents from the preferred enterprise’s

earnings as above will be subject to tax at a rate of 20%.

The Subsidiary

did not apply Amendment No.

tax rate on preferred income form a preferred enterprise in 2014 and thereafter will be 16 % (in development area A it will be 9 %).

71 also prescribes that any dividends distributed to individuals or foreign residents from the preferred enterprise’s earnings as

above will be subject to tax at a rate of 20 %.

Subsidiary did not apply Amendment No.

71 with respect to the preferred enterprise status, but may choose to apply Amendment No.

PLURISTEM THERAPEUTICS INC.

Box Regime “Technological Preferred Enterprise”:

December 2016, the Knesset approved amendments to the Law that introduce an innovation box regime (the “Innovation Box

Regime”) for intellectual property (IP)-based companies, enhance tax incentives for certain industrial companies and reduce

the standard corporate tax rate and certain withholding rates starting in 2017.

Innovation Box Regime was tailored by the Israeli government to a post-base erosion and profit shifting world, encouraging multinationals

to consolidate IP ownership and profits in Israel along with existing Israeli research and development (“R&D”) functions.

Tax benefits created to achieve this goal include a reduced corporate income tax rate of 6 % on IP-based income and on capital gains from

future sale of IP.

6 % rate would apply to qualifying Israeli companies that are part of a group with global consolidated revenue of over NIS 10 billion

(approximately $ 2.9 billion).

Other qualifying companies with global consolidated revenue below NIS 10 billion, would be subject to a

12 % tax rate.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 12:- TAXES

ON INCOME (CONT.)

Box Regime “Technological Preferred Enterprise”:

2016, the Knesset approved amendments to the Law that introduce an innovation box regime (the “Innovation Box Regime”)

for intellectual property (IP)-based companies, enhance tax incentives for certain industrial companies and reduce the standard

corporate tax rate and certain withholding rates starting in 2017.

The Innovation

Box Regime was tailored by the Israeli government to a post-base erosion and profit shifting world, encouraging multinationals

to consolidate IP ownership and profits in Israel along with existing Israeli research and development (“R&D”)

Tax benefits created to achieve this goal include a reduced corporate income tax rate of 6% on IP-based income and on

capital gains from future sale of IP.

would apply to qualifying Israeli companies that are part of a group with global consolidated revenue of over NIS 10 billion (approximately

$2.9 billion).

Other qualifying companies with global consolidated revenue below NIS 10 billion, would be subject to a 12% tax

However, if the Israeli company is located in Jerusalem or in certain northern or southern parts of Israel, the tax rate

is further reduced to 7.5%.

Additionally, withholding tax on dividends for foreign investors would be subject to a reduced rate

of 4% for all qualifying companies (unless further reduced by a treaty).

the regime is not conditioned on making additional investments in Israel, and a company could qualify if it invested at least 7%

of the last three years’

revenue in R&D (or incurred at least NIS 75 million in R&D expenses per year) and met one

of the following three conditions:

At least 20% of its employees are R&D employees engaged

in R&D (or employs, in total, more than 200 R&D employees);

Venture capital investments in the aggregate of NIS 8 million

were previously made in the company;

Average annual growth over three years of 25% in sales

or employees.

- TAXES ON INCOME (CONT.)

if the Israeli company is located in Jerusalem or in certain northern or southern parts of Israel, the tax rate is further reduced to

Additionally, withholding tax on dividends for foreign investors would be subject to a reduced rate of 4 % for all qualifying companies

(unless further reduced by a treaty).

the regime is not conditioned on making additional investments in Israel, and a company could qualify if it invested at least 7 % of the

last three years’ revenue in R&D (or incurred at least NIS 75 million in R&D expenses per year) and met one of the following

three conditions:

At least 20 % of its employees are R&D employees engaged in R&D (or employs, in total, more than 200 R&D employees);

Venture capital investments in the aggregate of NIS 8 million were previously made in the company;

Average annual growth over three years of 25 % in sales or employees.

not meeting the above conditions may still be considered as a qualified company at the discretion of the IIA.

Companies wishing

to exit from the regime in the future will not be subject to claw back of tax benefits.

The Knesset also approved a stability clause

in order to encourage multinationals to invest in Israel.

Accordingly, companies will be able to confirm the applicability of tax

incentives for a 10-year period under a pre-ruling process.

Further, in line with the new Organization for Economic Co-operation

and Development Nexus Approach, the Israeli Finance Minister will promulgate regulations to ensure companies are benefiting from

the regime to the extent qualifying research and development expenditures are incurred.

The regulations were set to be finalized

by March 31, 2017, with new amendments to the Law coming into effect after the regulations have been finalized.

Taxable income

which is not produced as part of “Preferred Enterprise”

income will be taxed at the regular tax rate (23% in 2020).

30, 2020, the Company’s management believes that the Company meets the conditions mentioned above to be considered as a Technological

Preferred Enterprise.

PLURISTEM THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 12:- TAXES

ON INCOME (CONT.)

Pluristem GmbH:

The tax rate applicable to the

German Subsidiary is the corporate tax rate of 15%, which is derived from the German Corporation Tax Act and Solidarity surcharge

of 5.5% from the 15% corporate tax rate.

This corporate tax rate excludes trade tax, which rate depends on the municipality in

which the German Subsidiary conducts its business.

Companies wishing to exit

from the regime in the future will not be subject to claw back of tax benefits.

The Knesset also approved a stability clause in order

to encourage multinationals to invest in Israel.

Accordingly, companies will be able to confirm the applicability of tax incentives for

a 10-year period under a pre-ruling process.

Further, in line with the new Organization for Economic Co-operation and Development Nexus

Approach, the Israeli Finance Minister will promulgate regulations to ensure companies are benefiting from the regime to the extent qualifying

research and development expenditures are incurred.

regulations were set to be finalized by March 31, 2017, with new amendments to the Law coming into effect after the regulations have

been finalized.

income which is not produced as part of “Preferred Enterprise” income will be taxed at the regular tax rate ( 23 % in 2020).

of June 30, 2021, the Company’s management believes that the Company meets the conditions mentioned above to be considered as a

Technological Preferred Enterprise.

tax rate applicable to the German Subsidiary is the corporate tax rate of 15%, which is derived from the German Corporation Tax Act and

Solidarity surcharge of 5.5% from the 15% corporate tax rate.

This corporate tax rate excludes trade tax, which rate depends on the municipality

in which the German Subsidiary conducts its business.

Trade tax is calculated on the basis of the trade income, to which the tax rate

2 unchanged sentences

Subsidiary is in Potsdam, and in Potsdam, the applicable rate of assessment is 455%.

Carryforward losses for tax purposes

30, 2020, Pluristem Therapeutics had a U.S.

federal net operating loss carryforward for income tax purposes in the amount of approximately

Net operating loss carryforward arising in taxable years , can be carried forward

and offset against taxable income for 20 years and expiring between 2023 and 2038.

net operating losses may be subject to substantial annual limitations due to the “change in ownership”

of the Internal Revenue Code of 1986 and similar state provisions.

The annual limitation may result in the expiration of net operating

losses before utilization.

In January 2018, Pluristem

Therapeutics registered as an Israeli resident with the ITA and the Israeli Value Added Tax Authorities.

As of June 30, 2020, Pluristem

Therapeutics and the Subsidiary consolidated accumulated losses, for tax purposes, are approximately $51,888, which may be carried

forward and offset against taxable business income and business capital gain in the future for an indefinite period.

The Subsidiary

has accumulated losses, for tax purposes, as of June 30, 2020, in the amount of approximately $129,286, which may be carried forward

and offset against taxable business income and business capital gain in the future for an indefinite period.

losses for tax purposes

of June 30, 2021, Pluristem Therapeutics had a U.S.

federal net operating loss carryforward for income tax purposes in the amount of

approximately $ 34,836 .

Net operating loss carryforwards arising in taxable years, can be carried forward and offset against taxable income

for 20 years and expire between 2023 and 2038.

net operating losses may be subject to substantial annual limitations due to the “change in ownership” provisions of

the Internal Revenue Code of 1986 and similar state provisions.

The annual limitation may result in the expiration of net operating losses

before utilization.

January 2018, Pluristem Therapeutics registered as an Israeli resident with the ITA and the Israeli Value Added Tax Authorities.

June 30, 2021, Pluristem Therapeutics and the Subsidiary consolidated accumulated losses, for tax purposes, are approximately $ 86,949 ,

which may be carried forward and offset against taxable business income and business capital gain in the future for an indefinite period.

Subsidiary has accumulated losses, for tax purposes, as of June 30, 2021, in the amount of approximately $ 129,286 , which may be carried

forward and offset against taxable business income and business capital gain in the future for an indefinite period.

PLURISTEM THERAPEUTICS INC.

German Subsidiary has accumulated losses, for tax purposes, as of June 30, 2021, in the amount of approximately $ 584 , which may be carried

forward and offset against taxable business income and business capital gain in the future for an indefinite period.

THERAPEUTICS INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

NOTE 12:- TAXES

ON INCOME (CONT.)

- TAXES ON INCOME (CONT.)

before income taxes

components of loss before income taxes are as follows:

Year ended June 30,

Consolidated loss of Pluristem Therapeutics and the Israeli subsidiary

Pluristem GmbH

income taxes:

1 unchanged sentence

reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets

are as follows:

Significant components of the Company’s deferred tax assets are as follows:

Deferred tax assets:

net operating loss carryforward

Israeli net operating loss and research and development expenses carryforward

Consolidated net operating loss carryforward

German subsidiary net operating loss carryforward

Operating loss carryforwards

Research and development credit carryforwards

Issuance costs

Allowances and reserves

2 unchanged sentences

Net deferred tax asset

30, 2020 and 2019, the Company has provided full valuation allowances in respect of deferred tax assets resulting from tax loss

carryforward and other temporary differences, since it has a history of operating losses and current uncertainty concerning its

of June 30, 2021 and 2020, the Company has provided full valuation allowances in respect of deferred tax assets resulting from tax loss

carryforwards and other temporary differences, since it has a history of operating losses and due to current uncertainty concerning its

ability to realize these deferred tax assets in the future.

accounts for its income tax uncertainties in accordance with ASC 740 which clarifies the accounting for uncertainties in income

taxes recognized in a Company’s financial statements and prescribes a recognition threshold and measurement attribute for

Company accounts for its income tax uncertainties in accordance with ASC 740 which clarifies the accounting for uncertainties in

income taxes recognized in a Company’s financial statements and prescribes a recognition threshold and measurement attribute for

the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

30, 2020 and 2019, there were no unrecognized tax benefits that if recognized would affect the annual effective tax rate.

of June 30, 2021 and 2020, there were no unrecognized tax benefits that if recognized would affect the annual effective tax rate.

Reconciliation

of the theoretical tax expense (benefit) to the actual tax expense (benefit):

2019 and 2018, the main reconciling item of the statutory tax rate of the Company (21% to 35% in 2020, 2019 and 2018) to the effective

tax rate (0%) is tax loss carryforwards, stock-based compensation and other deferred tax assets for which a full valuation allowance

was provided.

NOTE 13:- SUBSEQUENT EVENTS

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

by the SEC on July 23, 2020, in July 2020 the Company entered into a new Open Market Sale Agreement SM (“New ATM

Agreement”) with Jefferies, which provides that, upon the terms and subject to the conditions and limitations in the New

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 $75,000 through Jefferies acting as sales agent.

As of September 5, 2020, no shares had been sold pursuant to the

New ATM Agreement.

Subsequent to year-end,

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 35,000 shares of common stock for net proceeds of approximately $245.

Subsequent to year-end, the Board of Directors approved (i) a grant of

1,000,000 RSUs to each of Mr.

Yanay, and Mr.

Aberman of which 500,000 shares vest over a term of 4 years from the date of the grant

and 500,000 shares shall vest pursuant to certain performance metrics, (ii) a grant of 100,000 RSUs to Mrs.

Franco-Yehuda, which

vest over a term of 4 years from the date of grant;

and (iii) 20,000 RSUs to each of the Company’s non-executive directors,

which vest over a term of 4 years from the date of the grant.

of taxes at the federal statutory rate to Company’s provision for income taxes:

2021 and 2020, the main reconciling item of the statutory tax rate of the Company ( 21 % to 23 %) to the effective tax rate ( 0 %) is tax

loss carryforwards, share-based compensation and other deferred tax assets for which a full valuation allowance was provided.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data