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Item 7. Management’s Discussion and Analysis

2022-09-21 compared with 2021-09-13 · 292 added, 251 removed, 28 unchanged (95% of the section changed)

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

are a biotechnology company focused in the field of regenerative medicine, and a leading developer of placenta-based cell therapy product

candidates for the treatment of multiple inflammatory, muscle injuries and hematologic conditions.

Our operations are focused on the

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

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

The cells are grown using our proprietary three-dimensional expansion technology and can be administered to patients off the-shelf,

without blood or tissue matching prior to administration.

PLX cells are believed to release a range of therapeutic proteins in response

to the patient’s condition, such as inflammation, muscle trauma, hematological disorders and radiation damage.

We are conducting several

multinational clinical studies which consist of a Phase III clinical study in muscle recovery following surgery for hip fracture and two

Phase II clinical studies in ARDS associated with COVID-19 in the United States, Europe and Israel.

In addition, we are focusing on other

clinical programs in the hematological field such as a Phase I clinical study for incomplete recovery following bone marrow transplantation

in the United States and Israel, an investigator-led Phase I/II cGVHD study in Israel, and ARS under the FDA animal rule.

We believe that

each of these indications is a severe unmet medical need.

Our manufacturing facility

complies with the European, Japanese, Israeli, South Korean and the FDA’s cGMP requirements and has been inspected and approved

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

We have also been granted manufacturer/importer

authorization and cGMP Certification by the MOH.

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

in-house production capacity to grow PLX cells in commercial quantities.

goal is to make significant progress with our clinical pipeline and our clinical studies in order to ultimately bring innovative, potent

therapies to patients who need new treatment options.

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

platform and commercial-scale manufacturing capacity.

Our business model for commercialization and revenue generation includes, but is

not limited to, licensing deals, joint ventures with pharmaceutical companies, direct sale of our products, and partnerships.

OF OPERATIONS – YEAR ENDED JUNE 30, 2021 COMPARED TO YEAR ENDED JUNE 30, 2020.

for the year ended June 30, 2020 were $23,000 compared to no revenues for the year ended June 30, 2021.

The revenues in the year ended

June 30, 2020 were related to the sale of our PLX cells for research use.

and Development, Net

Research and development net costs (costs less participation and grants

by the IIA, Horizon 2020 and other parties) increased by 39% from $21,577,000 for the year ended June 30, 2020 to $30,066,000 for the

year ended June 30, 2021.

The increase is mainly attributed to (1) an increase in clinical study subcontractor expenses which mostly relates

to ARDS associated with COVID-19 Phase II clinical studies, (2) an increase in payroll expenses related to payroll adjustments and exchange

rate adjustment that relates to the strength of the NIS against the U.S.

dollar, (3) increased share-based compensation expenses due to

increased amount of restricted stock units, or RSUs, granted during the year ended June 30, 2021 compared to the amount of RSUs granted

during the year ended June 30, 2020, and (4) a decrease in the participation of Horizon 2020 in our clinical programs.

The increased research

and development net costs were partially offset by a decrease in travel abroad expenses due to the COVID–19 pandemic.

and Administrative

General and administrative expenses increased by 159% from $7,922,000

We are a biotechnology company with an advanced cell-based technology

We have developed a unique three-dimensional, or 3D, technology platform for cell expansion with an industrial scale in-house

GMP cell manufacturing facility.

We are utilizing our technology in the field of regenerative medicine and food tech and plan to utilize

it in other industries and verticals that have a need for our mass scale and cost-effective cell expansion platform.

We use our advanced cell-based

technology platform in the field of regenerative medicine to develop placenta-based cell therapy product candidates for the treatment

of inflammatory, muscle injuries and hematologic conditions.

Our PLX cells are adherent stromal cells that are expanded using our 3D platform.

Our PLX cells can be administered to patients off-the-shelf, without blood or tissue matching or additional manipulation prior to administration.

PLX cells are believed to release a range of therapeutic proteins in response to the patient’s condition.

Our operations are focused on the research, development and manufacturing

of cells and cell-based products, conducting clinical studies and the business development of cell therapeutics and cell-based technologies,

such as our recent collaboration with Tnuva Food Industries – Agricultural Cooperative in Israel Ltd., through its fully owned subsidiary,

Tnuva, to use our technology to establish a cultivated food platform.

We expect to demonstrate a

real-world impact and value from our cell-based technology platform, our current PLX pipeline and from other cell-based product candidates

that may be developed based on our platform.

Our business model for commercialization and revenue generation includes, but is not limited

to, licensing deals, joint ventures, partnerships, joint development agreements and direct sale of our products.

We are now completing a multinational

Phase III clinical study in muscle recovery following surgery for hip fracture, with sites in the United States, Europe and Israel.

the last year, we have completed a Phase II clinical study in Acute Respiratory Distress Syndrome, or ARDS, associated with COVID-19 and

a Phase I clinical study for incomplete recovery following bone marrow transplantation.

Additional areas of focus for clinical development

include an investigator-led Phase I/II Chronic Graft versus Host Disease, or cGVHD, study in Israel, and an Acute Radiation Syndrome,

or ARS, program under the U.S.

Food and Drug Administration, or FDA, animal rule.

We believe that each of these indications represents

a severe unmet medical need.

We were incorporated in Nevada on May 11, 2001.

owned subsidiary, Pluri Biotech Ltd., or the Subsidiary, previously named Pluristem Ltd., which is incorporated under the laws of the

State of Israel.

In January 2020, the Subsidiary established a wholly owned subsidiary, Pluristem GmbH, which is incorporated under the

laws of Germany.

In January 2022, the Subsidiary established an additional subsidiary, Plurinuva Ltd., or Plurinuva, which is incorporated

under the laws of Israel, which followed the execution of the collaboration agreement with Tnuva .

On July 26, 2022, we completed

our legal entity name change from Pluristem Therapeutics Inc.

to Pluri Inc., by merging a wholly-owned

subsidiary with and into the Company, with us being the surviving corporation.

The name change reflects a broader strategy of leveraging

our 3D cell expansion technology to develop innovative cell-based products that can be harnessed for a range of fields beyond medicine,

providing solutions for various areas of life.

Effective July 26, 2022, our Nasdaq ticker symbol was changed to “PLUR.”

RESULTS OF OPERATIONS – YEAR ENDED JUNE 30, 2022 COMPARED

TO YEAR ENDED JUNE 30, 2021.

Revenues for the year ended

June 30, 2022 were $234,000, compared to no revenues for the year ended June 30, 2021.

The revenues in the year ended June 30, 2022 were

related to the revenue derived from our license agreement with Takeda and the sale of our PLX cells for research use.

Research and Development, Net

Research and development,

net (costs less participation and grants by the IIA, Horizon 2020 and other parties) decreased by 19% from $30,066,000 for the year ended

June 30, 2021, to $24,377,000 for the year ended June 30, 2022.

The decrease is mainly attributed to a decrease

in clinical study expenses following the termination of our CLI study, end of enrollment of our Phase II studies of ARDS associated with

COVID-19, and end of enrollment in our Phase III hip study , as well as a decrease in share-based

compensation expenses related to restricted share units, or RSUs, granted to employees and consultants.

The decrease was partially offset

by an increase in materials purchased to support our manufacturing plans, increased payroll expenses related to payroll adjustments and

exchange rate fluctuations, and an increase in building lease costs following the extension of our lease contract.

General and Administrative

General and administrative

expenses decreased by 15% from $20,557,000 for the year ended June 30, 2021, to $17,450,000 for the year ended June 30, 2022.

decrease is mainly attributed to a decrease in share-based compensation expenses related to market based vesting conditioned RSUs granted

to our CEO and Chairman, partially offset by an increase in share-based compensation expenses related to the allocation of shares

of Plurinuva to our CEO, CFO and Chairman pursuant to their employment or consulting agreement (see also notes 1e and 9b1 to the consolidated

financial statements included elsewhere in this Annual Report) and increased payroll expenses related to new employees, payroll adjustments

and exchange rate fluctuations.

Total Financial Income, Net

Financial income, net decreased from $758,000 for the year ended June

30, 2021 to $219,000 for the year ended June 30, 2022.

This decrease is mainly attributable to an

increase in interest expenses related to the EIB loan provided to us in June 2021 pursuant to the EIB Finance Agreement and losses

from hedging transactions due to strength of the U.S Dollar against the Euro, partially offset by

exchange rate income on lease liability due to the strength of the U.S Dollar against the NIS and exchange rates adjustments relating

to the EIB loan.

Net loss decreased from $49,865,000

for the year ended June 30, 2021 to $41,374,000 for the year ended June 30, 2022.

The increase is mainly attributed to:

(1) an increase

in share-based compensation expenses related to the amount of RSUs granted, the fair value of such grants at the time of the grants and

their expected vesting periods, including RSU awards to our CEO and Executive Chairman (see note 9(3) in our accompanying financial statements),

(2) an increase in payroll expenses, mostly related to the entitlement of our Executive Chairman to certain adjustment fees pursuant to

his amended consulting agreement, payroll adjustments, accruals for target bonuses for our CEO and Chief Financial Officer, or CFO, according

to their amended employment agreements during the year ended June 30, 2021, and an exchange rate adjustment that relates to the strength

of the NIS against the U.S.

dollar, and (3) an increase in directors and officers insurance premium expense.

The increase in general and

administrative expenses was partially offset by a decrease in RSU expenses relating to RSUs granted to consultants, lower travel abroad

expenses due to the COVID-19 pandemic and lower expenses related to the EIB Finance Agreement.

Financial income increased

from $324,000 for the year ended June 30, 2020 to $758,000 for the year ended June 30, 2021.

This increase is mainly attributable to (1)

increased income from exchange rate differences related to the strength of the NIS against the U.S.

dollar on deposits linked to NIS,

and (2) increased interest income from bank deposits due to an increase in our deposits.

The increase in financial income was partially

offset by an increase in interest expenses relating to the EIB loan.

Loss for the year ended June 30, 2021 amounted to $49,865,000 as compared

to a loss of $29,152,000 for the year ended June 30, 2020.

The changes were mainly due to increases in general and administrative expenses

and research and development expenses, net, for the reasons mentioned above.

Loss per share for the year ended June 30, 2021 was $1.77,

as compared to $1.60 loss per share for the year ended June 30, 2020.

The loss per share for the year increased mainly as a result of

an increase in the loss for the year, offset by an increase in our weighted average number of shares due to the issuance of additional

shares during Fiscal Year 2021.

increase in weighted average common shares outstanding reflects the issuances of shares pursuant to a securities purchase agreement with

certain institutional investors in February 2021, issuances of shares pursuant to our Open Market Sale Agreement SM , or the

ATM Agreement, that we entered into with Jefferies LLC, or Jefferies, on July 16, 2020, and issuances of additional shares upon settlement

of RSUs issued to directors, employees and consultants, and shares issued as a result of the exercise of outstanding warrants and options.

and Capital Resources

of June 30, 2021, our total current assets were $67,371,000 and our total current liabilities were $11,517,000.

On June 30, 2021, we

had a working capital surplus of $55,854,000 and an accumulated deficit of $330,021,000.

of June 30, 2020, our total current assets were $48,461,000 and our total current liabilities were $7,987,000.

On June 30, 2020, we had

a working capital surplus of $40,474,000 and an accumulated deficit of $280,156,000.

cash and cash equivalents and restricted cash as of June 30, 2021 amounted to $31,838,000 which reflects an increase of $22,609,000 from

the $9,229,000 reported as of June 30, 2020.

Cash balances increased in the year ended June 30, 2021 for the reasons presented below.

Our cash used by operating activities was $30,910,000 during the year

The decrease was

mainly due to a decrease in research and development expenses , net, and a decrease in general

and administrative expenses for the reasons mentioned above.

We had a net loss attributed

to our non-controlling interest in Plurinuva for the year ended June 30, 2022 of $132,000.

Loss per share for the year

ended June 30, 2022 was $1.28, as compared to $1.77 loss per share for the year ended June 30, 2021.

The change in the loss per share

was mainly as a result of a decrease in the loss for the year, partially offset by an increase in our weighted average number of shares

due to the issuance of additional shares during Fiscal Year 2022.

The increase in weighted average

common shares outstanding reflects the issuance of additional shares upon settlement of RSUs issued to directors, employees and consultants.

Liquidity and Capital Resources

As of June 30, 2022, our total

current assets were $57,747,000 and our total current liabilities were $6,829,000.

On June 30, 2022, we had a working capital surplus

of $50,918,000 and an accumulated deficit of $371,263,000.

As of June 30, 2021, our total

current assets were $67,371,000 and our total current liabilities were $11,517,000.

On June 30, 2021, we had a working capital surplus

of $55,854,000 and an accumulated deficit of $330,021,000.

Our cash and cash equivalents and restricted cash as of June 30, 2022,

amounted to $10,779,000, which reflects a decrease of $21,059,000 from the $31,838,000 reported as of June 30, 2021.

Our bank deposits

as of June 30, 2022, amounted to $45,244,000 compared to $56,978,000 as of June 30, 2021.

Our cash equivalents and restricted cash decreased

in the year ended June 30, 2022 for the reasons presented below.

Our cash used in operating activities was $36,501,000 during the year

ended June 30, 2022, and $30,910,000 during the year ended June 30, 2021.

Cash used by operating activities in the year ended June 30,

2021 primarily consisted of payments to subcontractors, suppliers, and professional services providers related to our ongoing clinical

studies and payments of salaries to our employees, offset by participation of the IIA, Horizon 2020 and other grants.

Cash used by operating

activities in the year ended June 30, 2020 primarily consisted of payments to subcontractors, suppliers, and professional services providers

primarily related to our ongoing clinical trials and payments of salaries to our employees, offset by participation of the IIA, Horizon

2020 and other grants.

Cash used for investing activities

was $7,265,000 during the year ended June 30, 2021 and $30,458,000 during the year ended June 30, 2020.

The investing activities in the

year ended June 30, 2021 consisted primarily of cash used for investment in long-term deposits of $10,953,000 and payments of $373,000

related to investments in property and equipment, partially offset by the withdrawal of $4,061,000 of short-term deposits.

The investing

activities in the year ended June 30, 2020 consisted primarily of cash used for investment in short-term deposits of $17,949,000, investment

in long-term deposits of $12,239,000 and payments of $270,000 related to investments in property and equipment.

Financing activities

generated cash in the amount of $61,402,000 during the year ended June 30, 2021 and $60,870,000 during the year ended June 30, 2020.

The cash generated in the year ended June 30, 2021 from financing activities is related to:

(1) net proceeds of $36,589,000

comprised of funds received from our registered direct offering which closed in February 2021 and common shares issuances made under

the ATM Agreement, (2) proceeds of $24,449,000 received from the EIB pursuant to the EIB Finance Agreement, and (3) net proceeds of

$364,000 from the exercise of outstanding warrants.

The cash generated in the year ended June 30, 2020 from financing activities is

related to net proceeds of $43,262,000 from issuing our common shares under our prior Open Market Sales Agreement SM we

executed with Jefferies LLC on February 6, 2019, net proceeds of $14,901,000 from issuing our common shares in a registered direct

offering in May 2020 and net proceeds of $2,707,000 from issuing our common shares from the exercise of warrants.

July 16, 2020, we entered into the ATM Agreement with Jefferies, pursuant to which we may issue and sell shares of our common shares

having an aggregate offering price of up to $75,000,000 from time to time through Jefferies.

Upon entering into the ATM Agreement, we

filed a new shelf registration statement on Form S-3, which was declared effective by the SEC on July 23, 2020.

During the year ended

June 30, 2021, we sold 1,045,097 of our common shares under the ATM Agreement at an average price of $8.50 per share for aggregate net

proceeds of approximately $8,506,000.

the year ended June 30, 2021, warrants to purchase up to 51,999 shares from our April 2019 firm commitment public 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

February 2, 2021, we entered into a securities purchase agreement with several institutional investors, or the Investors, pursuant to

which we sold, in a registered direct offering, directly to the Investors, 4,761,905 common shares, for gross proceeds of $30,000,000.

The aggregate net proceeds were approximately $28,077,000, net of issuance expenses of approximately $1,923,000.

In April 2020, we and our

subsidiaries, Pluristem Ltd.

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

payable in three tranches.

The proceeds from the EIB Finance Agreement are intended to support our research and development in the European

Union to further advance our regenerative cell therapy platform, and to bring the products in our pipeline to market.

The proceeds from

the EIB Finance Agreement are expected to be deployed in three tranches, subject to the achievement of certain clinical, regulatory and

scaling up milestones.

June 2021, we received the first tranche in the amount of $24,449,000 (€20 million) pursuant to the EIB Finance Agreement.

received is due to be repaid on June 1, 2026 and bears annual interest of 4% to be paid together with the principal of the loan.

June 30, 2021, the interest accrued was in the amount of $78,000 (€65,000).

the years ended June 30, 2021 and 2020, we received total cash grants of approximately $239,000 and $1,227,000, respectively, from the

European Union research and development consortiums relating to the Horizon 2020 program.

IIA has supported our research activity.

Our last program was approved by the IIA in 2019 and relates to a grant of approximately $500,000.

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

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

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

In the absence of such sales,

no payment is required.

Cash used in operating activities in the year ended June 30,

2022, and in the year ended on June 30, 2021 primarily consisted of payments to subcontractors, suppliers, and professional services providers

related to our ongoing clinical studies and payments of salaries to our employees, offset by participation of the IIA, Horizon 2020 or

other third parties.

Cash provided by investing activities was $11,783,000 during the year

ended June 30, 2022, as opposed to cash used for investing activities of $7,265,000 during the year ended June 30, 2021.

Cash provided

by investing activities in the year ended June 30, 2022 consisted primarily of the withdrawal of $23,269,000 of long-term deposits, partially

offset by cash investment in short-term deposits of $11,206,000 and payments of $280,000 related to investments in property and equipment.

Cash used for investing activities in the year ended June 30, 2021, consisted primarily of cash

used for investment in long-term deposits of $10,953,000 and payments of $373,000 related to investments in property and equipment, partially

offset by the withdrawal of $4,061,000 of short-term deposits.

Financing activities provided

cash in the amount of $7,500,000 during the year ended June 30, 2022, and $61,402,000 during the year ended June 30, 2021.

The cash provided

in the year ended June 30, 2022, from financing activities is related to net proceeds of $7,500,000

received from an investment by Tnuva in Plurinuva .

The cash provided in the year ended

June 30, 2021 from financing activities is related to:

(1) net proceeds of $36,589,000 from our registered direct offering which closed

in February 2021 and common share issuances made under the Open Market Sale Agreement SM , or the ATM Agreement, that we entered

into with Jefferies LLC, or Jefferies, on July 16, 2020, (2) proceeds of $24,449,000 received from the EIB pursuant to the EIB Finance

Agreement, and (3) net proceeds of $364,000 from the exercise of outstanding warrants.

On July 16, 2020, we entered

into the ATM Agreement with Jefferies, pursuant to which we may issue and sell shares of our common shares having an aggregate offering

price of up to $75,000,000 from time to time through Jefferies.

Upon entering into the ATM Agreement, we filed a new shelf registration

statement on Form S-3, which was declared effective by the SEC on July 23, 2020.

During the year ended June 30, 2021, we sold 1,045,097

of our common shares under the ATM Agreement at an average price of $8.50 per share for aggregate net proceeds of approximately $8,506,000,

net of issuance expenses of $380,000.

During the year ended June 30, 2022, we did not sell of our

any common shares under the ATM Agreement.

In the year ended June 30,

2021, warrants to purchase up to 51,999 shares from our April 2019 firm commitment public 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 $364,000.

During the year

ended June 30, 2022, no warrants to purchase shares were exercised.

On February 2, 2021, we entered

into a securities purchase agreement with several institutional investors, or the Investors, pursuant to which we sold, in a registered

direct offering, directly to the Investors, 4,761,905 common shares, for gross proceeds of $30,000,000.

The aggregate net proceeds were

approximately $28,077,000, net of issuance expenses of approximately $1,923,000.

In April 2020, we and our subsidiaries, Pluristem Ltd.

and Pluristem

GmbH, executed the EIB Finance Agreement for funding of up to €50 million in the aggregate, payable in three tranches.

from the EIB Finance Agreement are intended to support our research and development in the European Union to further advance our regenerative

cell therapy platform, and to bring the products in our pipeline to market.

The proceeds from the EIB Finance Agreement are expected to

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

We do not expect

to receive additional funds pursuant to the EIB Finance Agreement.

During June 2021, we received

the first tranche in the amount of €20 million pursuant to the EIB Finance Agreement.

The amount received is due to be repaid on

June 1, 2026 and bears annual interest of 4% to be paid together with the principal of the loan.

As of June 30, 2022, the interest accrued

was in the amount of €865,000.

In addition to the interest payable to the EIB, the EIB is also

entitled to royalty payments, pro-rated to the amount disbursed from the EIB loan, on our consolidated revenues beginning in the fiscal

year 2024 up to and including its fiscal year 2030, in an amount equal to up to 2.3% of our consolidated revenues below $350 million,

1.2% of our consolidated revenues between $350 million and $500 million and 0.2% of our consolidated revenues exceeding $500 million.

Non-dilutive grants

During the year ended June

30, 2022, we did not receive any cash grants from the European Union research and development consortiums relating to the Horizon 2020

program, as opposed to approximately $239,000 received in cash during the year ended June 30, 2021.

According to the IIA grant

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

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

In the absence of such sales, no payment

During the year ended June 30, 2022, no royalties were paid to the IIA.

The IIA may impose certain conditions

on any arrangement under which the IIA permits the Company to transfer technology or development out of Israel or outsource manufacturing

out of Israel.

While the grant is given to the Company over a certain period of time (usually a year), the requirements and restrictions

under the Israeli Law for the Encouragement of Industrial Research and Development, 1984 continue and do not have a set expiration period,

except for the royalties, which requirement to pay them expires after payment in full.

May 2020, we were 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 AI based end-to-end genome-editing solutions.

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

grant allocated to us, for a period of 18 months, with a potential for extension of an additional 18 months and additional budget from

CRISPR-IL participants include leading companies, and medical and academic institutions.

As of June 30, 2021, we received total

grants of approximately $401,000 in cash from the IIA pursuant to the CRISPR-IL consortium program.

The CRISPR-IL consortium program

does not require any obligation to pay royalties

July 2018, we were awarded a marketing grant of approximately $52,000 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 our

advanced cell therapy products in the U.S.

July 2017, we were awarded an additional Smart Money grant of approximately $229,000 from Israel’s Ministry of Economy.

government granted us budget resources that we intend to use to advance our product candidate towards marketing in China-Hong Kong markets.

We 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.

August 2016, our CLI program in the European Union was awarded a €7,600,000 (approximately $8,500,000) non-royalty bearing grant.

The grant is part of the European Union’s Horizon 2020 program.

The Phase III study of PLX-PAD in CLI will be a collaborative project

carried out by an international consortium led by the Berlin-Brandenburg Center for Regenerative Therapies together with the Company

and with participation of additional third parties.

30, 2022 , total grants obtained from the IIA aggregated to approximately $27,743,000 and total royalties

paid and accrued amounted to $169,000.

The IIA may impose certain

conditions on any arrangement under which the IIA permits the Company to transfer technology or development out of Israel or outsource

manufacturing out of Israel.

While the grant is given to the Company over a certain period of time (usually a year), the requirements

and restrictions under the Israeli Law for the Encouragement of Industrial Research and Development, 1984 continue and do not have a set

expiration period, except for the royalties, which requirement to pay them expires after payment in full.

In June 2020, we

announced that we were 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 AI based end-to-end genome-editing

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

was a direct grant allocated to us, for an initial period of 18 months.

During October 2021, we

received an approval for an additional grant of approximately $583,000 from the IIA pursuant to the CRISPR-IL consortium program, for

an additional period of eighteen months.

The CRISPR-IL consortium program does not include any obligation to pay royalties.

As of June 30, 2022 and 2021,

we received total grants of approximately $694,000 and $401,000 in cash from the IIA pursuant to the CRISPR-IL consortium program, respectively.

In July 2017, we were awarded

the Smart Money grant of approximately $229,000 from Israel’s Ministry of Economy.

The Israeli government granted us budget resources

to advance our product candidate towards marketing in China-Hong Kong markets.

The Smart Money program ended on April 2022.

30, 2022, we received total grants of approximately $179,000 in cash from Israel’s Ministry of Economy for the Smart Money program.

In August 2016, our CLI program

in the European Union was awarded a €7,600,000 non-royalty bearing grant.

The grant is part of the European Union’s Horizon

2020 program.

The Phase III study of PLX-PAD in CLI will be a collaborative project carried out by an international consortium led by

the Berlin-Brandenburg Center for Regenerative Therapies together with the Company and with participation of additional third parties.

The grant covered a significant portion of the CLI program costs.

An amount of €1,900,000

(approximately $2,100,000) is a direct grant allocated to us, and the Company also had cost savings resulting from grant amounts allocated

to the other consortium members.

In July 2017, the consortium amended the consortium agreement, pursuant to which the original grant

allocation was amended such that we will receive an additional direct grant of €1,177,000 (approximately $1,295,000).

The additional

direct grant was allocated to us from the total amount of the original grant.

As of June 30, 2021, we received €2,615,000 (approximately

$2,946,000) and we expect to receive an additional €461,000 (approximately $548,000).

September 2017, our Phase III study of PLX-PAD cell therapy in the treatment of muscle injury following surgery for hip fracture was

awarded a €7,400,000 (approximately $8,300,000) grant, as part of the European Union’s Horizon 2020 program.

This Phase III

study will be a collaborative project carried out by an international consortium led by Charité, together with us, and with participation

of additional third parties.

The grant will cover a significant portion of the project costs.

An amount of € 2,550,000 (approximately

$2,900,000) is a direct grant allocated to us for manufacturing and other costs, and we also expect to have a direct benefit from cost

savings resulting from grant amounts allocated to the other consortium members.

As of June 30, 2021, we received €2,166,000 (approximately

$2,540,000) and we expect to receive an additional €382,000 (approximately $454,000).

October 2017, the nTRACK, a collaborative project carried out by an international consortium led by Leitat was awarded a €6,800,000

(approximately $7,600,000) non-royalty bearing grant.

An amount of €500,000 (approximately $560,000) is a direct grant allocated

We also expect to benefit from cost savings resulting from grant amounts allocated to the other consortium members.

30, 2021, we received €414,000 (approximately $473,000) and we expect to receive an additional €73,000 (approximately $87,000).

have accumulated a deficit of $330,021,000 since our inception in May 2001.

We do not expect to generate any significant revenues from

sales of products in the next twelve months.

Our cash needs may increase in the foreseeable future.

We expect to generate revenues, from

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

may be required to obtain additional liquidity resources in order to support the commercialization of our products and maintain our research

and development and clinical trials activities.

are continually looking for sources of funding, including non-diluting sources such as collaboration with other companies via licensing

agreements, the EIB Finance Agreement, the IIA grants, the European Union grant and other research grants, and sales of our common shares.

believe that we have sufficient cash to fund our operations for at least the next 12 months.

of Critical Accounting Policies and Estimates

significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing in this Annual

We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and

results of operations.

An amount of €1,900,000 is a direct grant allocated to us, and

the Company also had cost savings resulting from grant amounts allocated to the other consortium members.

In July 2017, the consortium

amended the consortium agreement, pursuant to which the original grant allocation was amended such that we will receive an additional

direct grant of €1,177,000.

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

30, 2022, we received a total of €2,615,000 (approximately $2,946,000) and we expect to receive an additional €461,000 (approximately

In September 2017, our Phase

III study of PLX-PAD cell therapy in the treatment of muscle injury following surgery for hip fracture was awarded a €7,400,000 grant,

as part of the European Union’s Horizon 2020 program.

This Phase III study was a collaborative project carried out by an international

consortium led by Charité, together with us, and with participation of additional third parties.

The grant covered a significant

portion of the project costs.

An amount of € 2,550,000 is a direct grant allocated to us for manufacturing and other costs, and we

also expect to have a direct benefit from cost savings resulting from grant amounts allocated to the other consortium members.

30, 2022, we received a total of €2,166,000 (approximately $2,540,000) and we expect to receive an additional €382,000 (approximately

In October 2017, the nTRACK,

a collaborative project carried out by an international consortium led by Leitat was awarded a €6,800,000 non-royalty bearing grant.

An amount of €500,000 is a direct grant allocated to us.

We also expect to benefit from cost savings resulting from grant amounts

allocated to the other consortium members.

As of June 30, 2022, we received a total of €414,000 (approximately $473,000) and we expect

to receive an additional €73,000 (approximately $76,000).

We have accumulated a deficit

of $371,263,000 since our inception in May 2001.

We do not expect to generate any significant revenues from sales of products in the next

twelve months.

We expect to generate revenues, from the sale of licenses to use our technology or products, but in the short and medium

terms will unlikely exceed our costs of operations.

We may be required to obtain

additional liquidity resources in order to support the commercialization of our products and technology and maintain our research and

development and clinical study activities.

We are continually looking

for sources of funding, including non-diluting sources such as collaboration with other companies via licensing agreements, the IIA grants,

the European Union grant and other research grants, and sales of our common shares.

We believe that we have sufficient

cash to fund our operations for at least the next twelve months.

Application of Critical Accounting Policies and Estimates

Our significant accounting

policies are more fully described in Note 2 to our consolidated financial statements appearing in this Annual Report.

We believe that

the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

The discussion and analysis

8 unchanged sentences

or conditions.

compensation is considered a critical accounting policy due to the significant expenses of RSUs which were granted to our employees,

directors and consultants.

In Fiscal Year 2021, we recorded share-based compensation expenses related to options, restricted shares and

RSUs in the amount of $13,968,000.

In accordance with ASC 718, “Compensation-Stock Compensation”,

or ASC 718, RSUs granted to employees and directors are measured at their fair value on the grant date.

All RSUs granted in fiscal years

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 RSUs granted in Fiscal Year 2021 to non-employee consultants were measured at their fair value on the grant date in accordance with

Share-Based Compensation

Share-based compensation is

considered a critical accounting policy due to the significant expenses of RSUs which were granted to our employees, directors and consultants.

In Fiscal Year 2022, we recorded share-based compensation expenses related to options, restricted shares and RSUs in the amount of $8,909,000.

In accordance with ASC 718,

“Compensation-Stock Compensation”, or ASC 718, RSUs granted to employees and directors are measured at their fair value on

the grant date.

All RSUs granted in fiscal years 2022 and 2021 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 RSUs granted in Fiscal Year 2022 to non-employee consultants were measured at

their fair value on the grant date in accordance with ASU No.

2018-07 - “Compensation—Share Compensation”.

value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods

in our consolidated statements of operations.

We have graded vesting based on the accelerated method over the requisite service period

of each of the awards.

The expected pre-vesting forfeiture rate affects the number of the shares.

Based on our historical experience,

the pre-vesting forfeiture rate per grant is 13% for the shares granted to employees and 0% for the shares granted to our directors and

officers and non-employee consultants.

and Development Expenses, Net

expect our research and development expenses to remain our primary expense in the near future as we continue to develop our product candidates.

Our research and development expenses consist primarily of clinical trials expenses, consultant and subcontractor expenses, payroll and

related expenses, lab material expenses, share-based compensation expenses, rent and maintenance expenses.

The following

table provides a breakdown of the related costs for fiscal years 2020 and 2021 (in thousands of dollars):

The fair value of shares of Plurinuva granted to CEO, CFO and Chairman

(see details in Item 11 below) was calculated using the Monte Carlo model, and fair value of the options of Plurinuva granted to employees

and officers were calculated using the Black Scholes model.

The value of the portion of

the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in our consolidated statements

of operations.

We have graded vesting based on the accelerated method over the requisite service period of each of the awards.

pre-vesting forfeiture rate affects the number of the shares.

Based on our historical experience, the pre-vesting forfeiture rate per

grant is 16% for the shares granted to employees and 0% for the shares granted to our directors and officers and non-employee consultants.

Research and Development Expenses, Net

We expect our research and

development expenses to remain our primary expense in the near future as we continue to develop our product candidates.

Our research and

development expenses consist primarily of clinical study expenses, consultant and subcontractor expenses, payroll and related expenses,

lab material expenses, share-based compensation expenses, rent and maintenance expenses.

The following table provides a breakdown of the

related costs for fiscal years 2021 and 2022 (in thousands of dollars):

Year ended June 30,

10 unchanged sentences

Research and development expenses, net

We invest heavily in research and development.

Research and development

expenses, net, were our major operating expenses, representing 59% and 73% of the total operating expenses for each of our fiscal years

2021 and 2020, respectively.

We expect that in the upcoming years our research and development expenses, net, will continue to be our

major operating expense.

We invest heavily in research

and development.

Research and development expenses, net, were our major operating expenses, representing 59% of the total operating expenses

for each of our fiscal years 2022 and 2021, respectively.

We expect that in the upcoming years our research and development expenses,

net, will continue to be our major operating expense.

Quantitative and

Qualitative Disclosures about Market Risk.

Not applicable.

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 7. Management’s Discussion and Analysis