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Item 8. Financial Statements and Supplementary Data

2022-09-21 compared with 2021-09-13 · 916 added, 927 removed, 282 unchanged (87% of the section changed)

Financial Statements and Supplementary Data.

Our financial statements are stated in thousands United States dollars

and are prepared in accordance with U.S.

Financial Statements

and Supplementary Data.

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

of Independent Registered Public Accounting Firm, dated September 21, 2022

Consolidated Balance Sheets

Consolidated Statements of Operations

Statements of Comprehensive Loss

Statements of Changes in Equity

1 unchanged sentence

Notes to the Consolidated Financial Statements

PLURISTEM THERAPEUTICS

AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL

AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2022

PLURISTEM THERAPEUTICS

AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2021

DOLLARS IN THOUSANDS

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

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

Report of Independent Registered Public Accounting Firm (PCAOB ID 1309 ) F-2 - F-3

Consolidated Balance Sheets F-4 - F-5

Consolidated Statements of Operations F-6

Statements of Changes in Shareholders’ Equity F-7 - F-8

Consolidated Statements of Cash Flows F-9

Notes to Consolidated Financial Statements F-10 - F-31

Report of Independent Registered Public Accounting

To the board of directors and shareholders of Pluri Inc.

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.

balance sheets of Pluri Inc.

and its subsidiaries (the “Company”) as of June 30, 2022 and 2021, and the related consolidated

statements of operations, of changes in shareholders’ equity and of cash flows for the years 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 as of June 30, 2022 and 2021, and the results of its operations

and its cash flows for the years 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.

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 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 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.

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 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.

Our audits 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 audits 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 audits provide

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.

The critical audit matter communicated below is

a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and

(ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

& Kesselman, Building 25, MATAM, P.O BOX 15084 Haifa, 3190500, Israel,

+972 -4- 8605000, Fax:

+972 -4- 8605001, www.pwc.com/il

Establishment of Plurinuva

As described in Note 1d to the consolidated

financial statements, on February 24, 2022, the Company established Plurinuva together with Tnuva for the purpose of developing

cultured meat products.

Tnuva invested in Plurinuva $7.5 million for ordinary shares and warrants to purchase ordinary shares.

The principal considerations for our determination that performing procedures relating to the establishment of Plurinuva is a

critical audit matter are (i) the audit efforts to determine such a transaction was properly accounted for by the Company;

(ii) involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures

and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures

included, among others, reading the agreements, public filings and the Company's minutes from meetings of the Board of Directors.

executive officers, key members and legal counsel of the Company, and the Audit Committee regarding the transaction.

We researched accounting

alternatives to evaluate the Company's accounting approach.

We involved a valuation professional, with specialized skills and knowledge,

who assisted in evaluating the valuation methodology which was included in the accounting analysis for the transaction.

We analyzed the

impacts of the transaction on the Company's financial statements.

In addition, we evaluated the overall sufficiency of audit evidence

obtained over the establishment of Plurinuva.

/s/ Kesselman & Kesselman

Certified Public Accountants (lsr.)

A member firm of PricewaterhouseCoopers International

A member firm of PricewaterhouseCoopers International Limited

Haifa, Israel

September 21, 2022

We have served as the Company’s

auditor since 2021.

Kost Forer Gabbay & Kasierer

144 Menachem Begin Road, Building A,

Tel-Aviv 6492102, Israel

+972-3-6232525

+972-3-5622555

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, 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.

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.

/s/ KOST FORER GABBAY &

A Member of Ernst & Young

We have served as the Company’s

auditor from 2003 to 2020.

Tel Aviv, Israel

September 10, 2020

PLURISTEM THERAPEUTICS INC.

CONSOLIDATED BALANCE SHEETS

Dollars in thousands (except share and

per share data)

We have served as the Company's auditor since

Kesselman & Kesselman,

Building 25, MATAM, P.O BOX 15084 Haifa, 3190500, Israel,

+972 -4- 8605000, Fax:

+972 -4- 8605001, www.pwc.com/il

AND ITS SUBSIDIARIES

BALANCE SHEETS

Dollars in thousands (except share and per

CURRENT ASSETS:

Cash and cash equivalents

Cash and cash

Short-term bank deposits

Restricted cash

Prepaid expenses and other current assets

expenses and other current assets

Total current

LONG-TERM ASSETS:

Long-term deposits

Long-term bank deposits

Restricted bank deposits

Severance pay fund

Property and equipment, net

Operating lease right-of-use asset

Other long-term assets

Total long-term assets

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

Property and equipment,

Operating lease right-of-use

long-term assets

Total long-term

The accompanying

notes are an integral part of the consolidated financial statements.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Dollars in thousands (except share and per share data)

LIABILITIES AND SHAREHOLDERS’

BALANCE SHEETS

Dollars in thousands (except share and per

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Trade payables

Accrued expenses

Operating lease

accounts payable

current liabilities

Operating lease liability

Accrued vacation and recuperation

Other accounts payable

Total current liabilities

LONG-TERM LIABILITIES

Accrued severance

Operating lease

Accrued severance pay

Operating lease liability

Loan from the European Investment Bank (“EIB”)

long-term liabilities

AND CONTINGENCIES

SHAREHOLDERS’

Total long-term liabilities

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY

Share capital:

3 unchanged sentences

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

Additional paid-in

shareholders’ equity

Total liabilities

and shareholders’ equity

Additional paid-in capital

Accumulated deficit

Total shareholders’ equity

Non-controlling interests

Total liabilities and equity

(*) Less than $1

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

The accompanying

notes are an integral part of the consolidated financial statements

AND ITS SUBSIDIARIES

1 unchanged sentence

Dollars in thousands (except share and per share data)

ended June 30,

Year ended June 30,

Operating expenses:

development expenses

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

development expenses, net

and administrative expenses

Total operating

Research and development expenses

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

Research and development expenses, net

General and administrative expenses

Operating loss

Financial income, net

Interest expense

Total financial income, net

Net loss attributed to non-controlling interests

Net loss attributed to shareholders

Loss per share:

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.

Basic and diluted loss per share

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

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

AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS’

Dollars in thousands (except share and per share data)

OF CHANGES IN SHAREHOLDERS’ EQUITY

Dollars in thousands (except share and per

Additional Paid-in

2 unchanged sentences

$ ( 280,156 )

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)

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

Issuance of common shares under Open Market Sales Agreement, net of issuance costs of $ 380 (Note 9(1)a)

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

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

Exercise of warrants by investors (Note 9(1)b)

Balance as of June 30, 2021

$ ( 330,021 )

The accompanying notes are

an integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

The accompanying

notes are an integral part of the consolidated financial statements .

AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS’

Dollars in thousands (except share and per share data)

OF CHANGES IN SHAREHOLDERS’ EQUITY

Dollars in thousands (except share and per

Shareholders’ Equity

Common Shares

Additional Paid-in

Total Shareholders’

Balance as of

Non-controlling

Balance as of July 1, 2021

$ ( 330,021 )

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

Share-based compensation to employees, directors, and non-employee consultants (Note 9(2)).

Establishment of Plurinuva and non-controlling interest in Plurinuva (Notes 1d).

Balance as of June 30, 2022

$ ( 371,263 )

(*) Less than $1

The accompanying notes are an

integral part of the consolidated financial statements.

PLURISTEM THERAPEUTICS INC.

The accompanying

notes are an integral part of the consolidated financial statements.

AND ITS SUBSIDIARIES

2 unchanged sentences

ended June 30

CASH FLOWS FROM OPERATING

CASH FLOWS FROM OPERATING ACTIVITIES:

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)

(decrease) in trade payables

(decrease) in other accounts payable and accrued expenses

Decrease in operating lease right-of-use asset and liability

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

of exchange rate changes on cash, cash equivalents, deposits and restricted cash

term interest payable pursuant to EIB loan

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

cash used for operating activities

FLOWS FROM INVESTING ACTIVITIES:

of property and equipment

Proceeds from withdrawal of short-term deposits

Investment in long-term deposits

cash provided by (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

related to issuance of common shares, net of issuance costs

related to exercise of warrants

related to investment in subsidiary by non-controlling interest

from EIB loan

Net cash provided

by financing activities

OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS

cash, cash equivalents and restricted cash

cash provided by financing activities

OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS and restricted cash

(decrease) in 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.

cash equivalents, restricted cash and restricted bank deposits at the end of the period

Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets:

Cash and cash equivalents

Restricted cash

Long- term restricted bank deposits

Total cash, cash equivalents, restricted cash and restricted bank deposits

The accompanying

notes are an integral part of the consolidated financial statements.

AND ITS SUBSIDIARIES

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.

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per

share amounts)

Effective July 26, 2022, Pluri Inc., a Nevada

corporation (“Pluri”), changed its name from Pluristem Therapeutics Inc.

The Company also changed its symbol on the Nasdaq

Global Market and Tel-Aviv Stock Exchange From “PSTI” to “PLUR”.

Pluri was incorporated on May 11, 2001.

has a wholly owned subsidiary, Pluri-Biotech Ltd.

(formerly known as 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.

In January 2022, the Subsidiary established a subsidiary, Plurinuva

(“Plurinuva”), which is incorporated under the laws of Israel, which followed the execution of the collaboration agreement

with Tnuva Food Industries – Agricultural Cooperative in Israel Ltd.

(through its fully owned subsidiary, Tnuva Food-Tech Incubator

(2019), Limited Partnership (“Tnuva”)).

Pluri, the Subsidiary, the German Subsidiary and Plurinuva are referred to as the

“Company” or “Pluri.” The Subsidiary, the German Subsidiary and Plurinuva are referred to as the “Subsidiaries.”

The Company is a bio-technology company with an advanced cell-based technology platform, which operates in one business segment.

The Company has developed a unique three-dimensional (“3D”) technology platform for cell expansion with an industrial scale in-house Good Manufacturing Practice cell manufacturing facility.

Pluri currently uses its technology in the field of regenerative medicine and food tech and plans to utilize it in other industries and verticals that have a need for mass scale and cost-effective cell expansion platform such as agri-tech and biologics.

Pluri is focused on the research, development and manufacturing of cell-based products, conducting clinical studies and the business development of cell therapeutics and cell-based technologies providing potential solutions for various fields.

has incurred an accumulated deficit of approximately $ 371,263 and incurred recurring operating losses and negative cash flows from

operating activities since inception.

As of June 30, 2022, the Company’s total shareholders’ equity amounted to $ 30,039 .

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.

During the year ended June 30, 2022, the Company incurred losses of $ 41,242 and its negative cash flow from operating activities was

As of June 30, 2022, the Company’s

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

totaled $ 56,657 .

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, and from sales of its equity securities and from

the proceeds received from the loan previously provided by the European Investment Bank (the “EIB”, see also note 7).

Company’s 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

There is no assurance, 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.

On January 5, 2022, the Subsidiary entered into definitive agreements (the “Agreements”) with Tnuva pursuant to which the Subsidiary and Tnuva established Plurinuva, with the purpose of developing cultured meat products.

Plurinuva received exclusive, global, royalty bearing licensing rights to use Pluri’s proprietary technology, intellectual property and knowhow in the field of cultured meat.

Tnuva invested $ 7,500 in Plurinuva and received 187,500 of Plurinuva’s ordinary shares, representing 15.79 % of the Plurinuva share capital as of February 24, 2022 (the “Closing Date”).

In addition, Tnuva received Warrants to invest up to an additional $ 7,500 over a period of twelve months following the Closing Date.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per

share amounts)

Warrant issued to Tnuva permits Tnuva to purchase up to 125,000 ordinary shares of Plurinuva at an exercise price of $ 40.00 per

share, and has a term commencing on the Closing Date and ending at the earlier of (i) six months from the Closing Date, (ii) immediately

prior to and subject to the consummation of an initial public offering or acquisition of Plurinuva or (iii) the consummation of a financing

round with a non-affiliated investor.

In addition, on the six month anniversary of the Closing Date, and provided that the First Warrant

has not expired, Plurinuva agreed to issue a Second Warrant to Tnuva which will permit Tnuva to purchase up to a number of ordinary shares

of Plurinuva, or the then most senior securities issued by Plurinuva, in consideration for such amount equal to 200 % of the remaining

balance of the aggregate purchase price of the First Warrant, provided that Tnuva exercises at least 62,500 ordinary shares

at a price per share of $ 40.00 , or $ 2,500 in the aggregate, of the First Warrant.

The Second Warrant’s exercise price per share

equals $ 76.00 .

The Second Warrant has a term commencing on the six month anniversary of the Closing Date and ending at the earlier of

(i) six months from its issuance, (ii) immediately prior to and subject to the consummation of an initial public offering or acquisition

of Plurinuva or (iii) the consummation of a financing round with a non-affiliated investor.

allocated the total consideration of $ 7,500 received in an amount equal to $ 6,718 for the

ordinary shares and $ 782 for the Warrants.

determined the fair value of the ordinary shares and the warrants utilizing a Monte Carlo simulation model (Level 3 classification), which

incorporates various assumptions including expected stock price volatility, risk-free interest rate, and the expected date of a qualifying

The Company estimated the volatility of the ordinary shares of Plurinuva based on data from similar companies operating in the

food tech field.

assumptions used in the Monte Carlo simulation model are as follows:

Risk-free interest rate

Expected stock price volatility

The consideration

allocated to the shares issued was divided between the non-controlling interests (“NCI”) and the Company’s shareholders

as this transaction is a transaction with the NCI.

The consideration

allocated to the warrants was recognized against the NCI.

23, 2022, Plurinuva and Tnuva executed an amendment to the warrant agreement, extending the exercise period of the First Warrant from

six months to nine months from the Closing Date.

All other terms remained unchanged.

On February 26, 2022, the Subsidiary allocated

a total of 45,936 of its shares in Plurinuva, which constitute approximately 3.87 % of Plurinuva’s ordinary shares, to

its Chairman, Chief Executive Officer and Chief Financial Officer, pursuant to the terms of their respective employment and/or consulting

agreements with the Company.

Following such allocations, the Company holds 80.34 % of the outstanding equity in Plurinuva.

the Company recognized compensation expenses in the amount of $ 1,646 representing the fair value of the respective allocated shares.

Based on the Company’s current assessment, the Company does not expect material impact on its operations due to the worldwide spread of COVID-19.

However, The Company may experience delays if the pandemic worsens and continues for an extended period of time and it is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented by governments to combat the virus throughout the world.

- SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

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.

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.

Estimates are primarily used for, but not limited to, valuation

of share-based compensation, valuation of warrants, determining the valuation and terms of leases.

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.

can affect the amounts reported in the financial statements and accompanying notes, and actual results could differ from those estimates.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per

share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

Functional currency

dollar is the primary currency

of the economic environment in which the Company and the Subsidiaries operate.

Thus, the U.S 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 consolidated statements of operations as financial

income or expenses, as appropriate.

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.

The consolidated financial statements

include the accounts of the Company and its Subsidiaries.

Non-controlling

interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to the Company.

Non-controlling

interests are presented in equity separately from the equity attributable to the shareholders of the Company.

Profit or loss and components

of other comprehensive income or loss are attributed to the Company and to non-controlling interests.

Losses are attributed to non-controlling

interests even if they result in a negative balance of non-controlling interests in the consolidated statements of operations.

The Company treats

transactions with non-controlling interests as transactions with its equity owners.

Accordingly, for sales or purchases of shares to or

from non-controlling interests, the difference between any consideration received or paid and the portion sold or acquired of the carrying

value of the net assets of the subsidiary is recorded in equity.

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.

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.

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

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

Interest on deposits is recorded as financial

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

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 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.

PLURISTEM THERAPEUTICS INC.

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.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per

share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

Property and equipment

Revenue Recognition

A contract with a customer exists only

(i) the parties to the contract have approved it and are committed to perform their respective obligations, (ii) the Company can

identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”),

(iii) the Company can determine the transaction price for the goods or services to be transferred, (iv) the contract has commercial substance

and (v) it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services

that will be transferred to the customer.

Revenues are recognized when the control

of the promised goods or the performance of the obligations are transferred to the customer, in an amount that reflects the consideration

to which the Company expects to be entitled to, excluding sales taxes.

The Company determines revenue recognition

through the following steps:

● identification of the contract

with a customer;

● identification of the performance

obligations in the contract;

● determination of the transaction

● allocation of the transaction

price to the performance obligations in the contract;

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

a performance obligation.

Property and equipment

are stated at cost, net of accumulated depreciation.

Property and equipment are stated at

cost, net of accumulated depreciation and impairments.

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

5 unchanged sentences

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

Repairs and maintenance expenditures, which are not considered improvements

and do not extend the useful life of property and equipment, are expensed as incurred.

Impairment of long-lived assets

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’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 2022 and 2021, no triggering events were identified, and no impairment losses were recorded.

Share-based compensation

The Company accounts for share-based

compensation in accordance with ASC 718, “Compensation-Share 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 model.

The Company estimates the

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

The Company accounts for employees’ share-based

4 unchanged sentences

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

2 unchanged sentences

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

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 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.

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

and RSUs grants are recognized on a graded vesting schedule over the vesting period.

For RSUs containing a market condition, the market

conditions are required to be considered when calculating the grant date fair value.

ASC 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 RSU award, a

Monte Carlo simulation valuation model was used to calculate the grant date fair value of such RSUs.

Expense for a market condition RSU

is recognized over the derived service period as determined through the Monte Carlo simulation model.

All RS and RSUs to employees and directors

granted during fiscal 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 of 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 RS and RSUs granted during fiscal years 2022 and 2021, was $ 2.87 and $ 9.76 per share, respectively.

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 as incurred.

Grants received from the Israel Innovation

Authority (the “IIA”) are 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 (see also note 8b).

Research and development expenses,

net for the year ended June 30, 2022 and 2021 include participation in research and development expenses in the amount of approximately

$ 228 and $ 467 , respectively.

Clinical study 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 study expense in the consolidated financial statements by matching the appropriate expenses with

the period in which services and efforts are expended.

During fiscal years 2022 and 2021,

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 $ 293 and $ 566 , for the year ended June 30, 2022

and 2021, 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.

The CRISPR-IL consortium is a group

funded by the IIA, comprised of leading experts in life science and computer science from academia, medicine, and industry, in order to

develop AI based end-to-end genome-editing solutions.

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.

Basic and diluted loss per share is

computed by dividing losses by the weighted average number of common shares outstanding during the year, including unexercised vested

options with a par value price.

All outstanding share options, unvested RSUs and warrants 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 RSUs excluded from the calculations of diluted net loss per share due

to their anti-dilutive effect was 5,247,803 and 5,700,994 for the years ended June 30, 2022, and 2021, respectively.

AND ITS SUBSIDIARIES

1 unchanged sentence

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

- SIGNIFICANT

ACCOUNTING POLICIES (CONT.)

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.

Income 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

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.

The Company 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 merits.

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

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.

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 bank deposits.

The majority of the Company’s

cash and cash equivalents, restricted cash, short-term and long-term deposits are mainly invested in dollar, EURO and NIS deposits 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.

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 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.

Severance pay

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

The majority 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.

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.

Upon contribution of the full amount of the

employee’s monthly salary for each year of employment, no additional obligation exists 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, for whom 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.

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.

AND ITS SUBSIDIARIES

1 unchanged sentence

Dollars in thousands (except share and per share amounts)

- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

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.

- SIGNIFICANT

ACCOUNTING POLICIES (CONT.)

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 accumulated up to the balance sheet date.

Severance expenses for the years ended June 30, 2022 and 2021 were $ 835 and $ 748 , 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 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.

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

The carrying 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 expenses, approximate fair value because of their generally

short term maturities.

The Company measures its derivative

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

Fair value is an exit price, representing

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

As such, fair value is a market-based

measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

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:

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

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

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 fair value.

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

On April 30, 2020, the Company, through

the German Subsidiary, entered into a finance contract (the “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 Company measures its liability

pursuant to the Finance Contract (see also note 7) 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 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 time.

Derivative financial instruments

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).

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 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.

The Company accounts for derivatives

and hedging based on ASC 815, “Derivatives and hedging”, as amended and related interpretations (“ASC 815”).

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

If a derivative meets the definition of a hedge

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

the change in fair value of the hedged assets, liabilities, or firm commitments through earnings (for fair value hedge transactions) or

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

If a derivative does not meet the definition

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

Cash flows related to 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”) and its loan from the EIB that is linked to the Euro.

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”.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

- 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

- 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, 2022, the fair value of the options contracts

is presented in “Other accounts payable” (see note 5) and as of June 30, 2021, the fair value of the options contracts is

presented in “Other current assets” (see note 3).

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

during the year ended June 30, 2022 and 2021 were ($ 373 ) and $ 35 respectively (see note 10).

Operating leases are included in operating

lease right-of-use (“ROU”) asset, 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.

Operating lease cost is recognized on a straight-line basis over

the expected lease term.

Lease agreements with a noncancelable term of less than 12 months are not recorded on the balance sheets.

The Company accounts for an extension

of a lease term that was not part of the original lease as a modification.

As a result, the Company reallocate contract consideration

between the lease and non-lease components, reassess lease classification, and remeasure the lease liability and right-of-use asset prospectively.

Assumptions such as the discount rate, fair value of the underlying asset, and variable rents based on a rate or index will be updated

as of the modification date.

Lease terms will include options to extend or terminate

the lease when it is reasonably certain that the Company will either exercise or not exercise the option to renew or terminate the lease.

Recently Issued Accounting

Pronouncements not yet adopted

2016-13 - “Financial

1 unchanged sentence

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):

In 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”).

1 unchanged sentence

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.

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.

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.

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 rules (“SRC”)) to fiscal years

beginning after December 15, 2022, including interim periods.

Early adoption is permitted.

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

The guidance requires a modified retrospective

transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

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.

In November 2021, the FASB issued ASU

2021-10 “Government Assistance (Topic 832)”, which requires annual disclosures that increase the transparency of transactions

involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the

effect of those transactions on an entity’s financial statements.

The amendments in this update are effective for financial statements

issued for annual periods beginning after December 15, 2021.

The Company 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.

For all periods presented, net loss

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

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.

AND ITS SUBSIDIARIES

4 unchanged sentences

Prepaid expenses

Accounts receivable from the IIA

Value Added Tax (VAT) receivables

Accounts receivable from the Ministry of Economy and Industry

Derivatives not designated as hedge instruments

Derivatives instruments

Other receivables

13 unchanged sentences

and $ 1,370 for the years ended June 30, 2022 and 2021, 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.

Most of the Company’s property

and equipment is located in Israel.

AND ITS SUBSIDIARIES

1 unchanged sentence

Dollars in thousands (except share and per share amounts)

- OTHER ACCOUNTS

Accrued vacation and recuperation

- OTHER ACCOUNTS PAYABLE

Deferred income from the Horizon 2020 grant and CRISPR-IL

Accrued payroll

Derivatives instruments

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:

Towards the termination of the previous

facility operating lease agreement, the Company signed, in December 2021,an addendum to its facility operating lease agreement (the “Addendum”)

with the lessor, which extended the lease period to December 2026.

In addition the Company has the option to extend the term of the lease

(the “Extension Option”) for an additional period of five years until December 2031.

The Company reflected the Extension Option

during the evaluation of the lease liability and right-of-use asset.

The monthly lease payments are approximately NIS 291,000 or $ 94 which

are linked to the consumer price index and will increase by 10 % in the event the Company exercises its Extension Option.

the Company has operating leases for vehicles that expire through fiscal year 2025.

Below is a summary of the Company’s operating

right-of-use assets and operating lease liabilities:

Operating right-of-use assets

2 unchanged sentences

Total operating lease liabilities

Minimum lease payments for the Company’s ROU assets

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

Maturities of operating lease liabilities

as of June 30, 2022 are as follows:

2028 and thereafter

Total undiscounted lease payments

Present value of lease liabilities

PLURISTEM THERAPEUTICS INC.

NOTES TO CONSOLIDATED FINANCIAL

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

1 unchanged sentence

The components of lease expense and supplemental cash flow

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

information related to leases for the year ended June 30, 2022 are as follows:

Year ended June 30,

Components of lease expense

Operating lease cost, net *

Operating lease payments linked to index, 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.

operating lease payments are linked to the consumer price index and are presented net after elimination of deferred participation payments

in amount of $ 124 and $ 248 for the year ended June 30, 2022 and 2021 respectively.

As of June 30, 2022, the weighted average

remaining lease term is 9.1 years, and the weighted average discount rate is 9 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.

For vehicles, the lease period is usually

- 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,

On April 30, 2020, the German Subsidiary

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, 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.

1 unchanged sentence

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.

The annual interest rate is 4 % (consisting of a 0 % fixed interest rate and a 4 % deferred

interest rate payable upon maturity,) for the first tranche, 4 % (consisting of a 1 % fixed interest rate and a 3 % deferred interest rate

payable upon maturity) for the second tranche and 3 % (consisting of a 1 % fixed interest rate and a 2 % deferred interest rate payable upon

maturity) 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.

NOTES TO CONSOLIDATED FINANCIAL

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

beginning of fiscal year 2024 and continuing up to and including its fiscal year 2030 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.

During June 2021, Pluri received the

first tranche in an amount of € 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, 2022, the linked principal balance in the amount of $ 20,779 and the interest

accrued in the amount of $ 899 are presented among long term liabilities.

The Finance Contract also contains certain limitations such

as the use of proceeds received from the EIB, limitations relates to disposal of assets, substantive changes in the nature of the Company’s

business, changes in holding structure, distributions of future potential dividends and engaging with other banks and financing entities

for other loans.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

- 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.

As of June 30, 2022, an amount

of $ 1,641 of cash and deposits was pledged by the Subsidiary to secure its hedging transaction, credit line, lease agreement 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.

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

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 year.

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, 2022, 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, 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

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.

NOTES TO CONSOLIDATED FINANCIAL

The Company was awarded a 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 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, 2022, the grant received from this Smart Money program was approximately $ 179 , program has ended and no royalties were paid or accrued.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

- 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.

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 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 .

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, 2022, the aggregate

amount of the grant received is approximately $ 52 and no royalties were paid or accrued.

As to potential royalties to the EIB, see note 7 .

- 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

(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 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, 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 preferred shares, 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 been issued.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

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

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 agent.

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, 2022 the Company did not sell any common shares under the ATM Agreement.

During the year ended June 30, 2021, a total of 519,990 warrants 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 .

During the year ended June 30, 2022 no warrants were exercised.

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.

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- SHAREHOLDERS’

EQUITY (CONT.)

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

The Company adopted, after

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.

4,761,905 common shares for gross proceeds of $ 30,000 .

The aggregate net proceeds were approximately $ 28,077 , net of issuance costs of

(2) Share options, RS and RSUs

to employees, directors and consultants:

The Company adopted a Share Option

Plan in 2005, an Equity Incentive Plan in 2016 and an Equity Compensation Plan in 2019 (together, the “Plans”).

Under the Plans, 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, 2022, 4,765,698 common

shares are available for future grants under the Plans.

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

A summary of the share options to non-employee consultants

is as follows:

ended June 30, 2021

Share options outstanding at beginning of period

4 unchanged sentences

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

PLURISTEM THERAPEUTICS INC.

NOTES TO CONSOLIDATED FINANCIAL

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

9 unchanged sentences

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:

Compensation expenses related to share

options granted to consultants were recorded as follows:

Year ended June 30,

Research and development expenses

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:

to employees and directors:

The following table summarizes the

activity related to unvested RSUs granted to employees and directors under the Plans, for the years ended June 30, 2022 and 2021:

Year ended June 30,

2 unchanged sentences

Expected to vest after the end of period

PLURISTEM THERAPEUTICS INC.

NOTES TO CONSOLIDATED FINANCIAL

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

- SHAREHOLDERS’

EQUITY (CONT.)

Compensation expenses

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

- SHAREHOLDERS’ EQUITY (CONT.)

Compensation expenses related to RSUs

and common shares granted to employees and directors were recorded as follows:

Year ended June 30,

1 unchanged sentence

General and administrative expenses

Unamortized compensation expenses

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

Unamortized compensation expenses related

to RSUs granted to employees and directors is approximately $ 3,094 to be recognized by the end of June 2026.

General and administrative expenses

1 - Compensation expenses for the year

ended June 30, 2022, in the amount of $ 1,646 were related to 45,936 ordinary shares of Plurinuva that were allocated during

February 2022 to the Company’s Chairman, Chief Executive Officer and Chief Financial Officer, each pursuant to the terms of their

respective employment and/or consulting agreements (see note 1d).

2 - 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.

its Chairman and Chief Executive Officer an aggregate of 1,000,000 RSUs (500,000 each) under the Plans.

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

6 unchanged sentences

Treasury bonds for the expiration date of the

The fair value

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

The fair value of the market-based

award uses the assumptions noted in the following table:

Risk-free interest rates

1 unchanged sentence

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.

NOTES TO CONSOLIDATED FINANCIAL

The Company recognizes compensation

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

The fair 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.

For the year ended June 30, 2022 and 2021 the Company recognized

$ 2,127 and $ 5,156 of expenses included in general and administrative expenses, respectively.

Options to employees and directors:

Compensation expenses related to options

of Plurinuva granted to Plurinuva‘s employees were recorded as follows:

Year ended June 30,

Research and development expenses

General and administrative expenses

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

- SHAREHOLDERS’

EQUITY (CONT.)

- SHAREHOLDERS’ EQUITY (CONT.)

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:

The following table summarizes the

activity related to unvested RS and RSUs granted to non-employee consultants for the years ended June 30, 2022 and 2021:

Year ended June 30,

1 unchanged sentence

Unvested at the end of the period

Compensation expenses

related to RSUs granted to consultants were recorded as follows:

Compensation expenses related to RSUs

granted to consultants were recorded as follows:

Year ended June 30,

1 unchanged sentence

General and administrative expenses

Summary of warrants and options:

Summary of warrants and

Warrants / Options

2 unchanged sentences

Total warrants and options

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

of June 30, 2021.

PLURISTEM THERAPEUTICS INC.

NOTES TO CONSOLIDATED FINANCIAL

This summary does not include 1,976,264 RSUs that are not

vested as of June 30, 2022.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands (except share and per share amounts)

- FINANCIAL INCOME, NET

- FINANCIAL INCOME (EXPENSES), NET

Year ended June 30,

2 unchanged sentences

Interest income on deposits

Gain from derivatives and fair value hedge derivatives

Gain (loss) from derivatives

Financial income, net

EIB loan interest expenses

- TAXES ON INCOME

Tax rates applicable to the Company:

Pluristem Therapeutics:

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

Tax rates applicable to the

corporate federal tax rate

applicable to Pluri is 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 Pluri conducts its business.

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 Pluri All losses

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

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.

In January 2018, Pluri 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, Pluri is classified as a dual resident for tax purposes both in Israel and the United States.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- 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.

In June 2018, Pluri Inc.

and the Subsidiary

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

The Subsidiary:

Consolidated taxable income of Pluri

and the Subsidiary (the “Consolidated tax unit”) is subject to tax at the rate of 23 % in 2022 and 2021.

The 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

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 2017.

The Law 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”).

Under 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).

In 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.

The 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 - 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).

Accelerated 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.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- TAXES ON INCOME (CONT.)

depreciation:

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:

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.

Non-compliance with the conditions may cancel all or part of the benefits

and refund of the amount of the benefits, including interest.

The management believes that the Subsidiary is meeting the aforementioned

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.

Conditions for the entitlement to

the benefits:

The 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

Non-compliance with the conditions may cancel all or part of the benefits and refund of the amount of the benefits, including

Company’s management believes that the Subsidiary is meeting the aforementioned conditions.

Amendments to the Law:

In 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.

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.

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.

68 became effective as of January 1, 2011.

According to Amendment

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.

On 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.

According to 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, the tax rate on preferred income form

a preferred enterprise in 2014 and thereafter will be 16 % (in development area A it will be 9 %).

Amendment No.

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

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

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.

71 in the future.

Innovation Box Regime “Technological

Preferred Enterprise”:

In 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.

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”) 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.

The 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).

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

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

Entering 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.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- 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.

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

of 3.5% is applied.

The measured amount is then multiplied by the applicable rate of assessment, the registered office of the German

Subsidiary is in Potsdam, and in Potsdam, the applicable rate of assessment is 455%.

losses for tax purposes

of June 30, 2021, Pluristem Therapeutics had a U.S.

Companies 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

Accordingly, companies will be able to confirm the applicability of tax incentives for a 10-year period under a pre-ruling

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 2022).

As of June 30, 2022, the Company’s

management believes that the Company meets the conditions mentioned above to be considered as a Technological Preferred Enterprise.

Pluristem GmbH:

The corporate tax rate applicable to

the German Subsidiary is 15%, which is derived from the German Corporation Tax Act and Solidarity surcharge of 5.5% from the 15% corporate

This corporate tax rate excludes trade tax, which rate depends on the municipality in which the German Subsidiary conducts its

Trade Tax is calculated by determining the Trade Tax Base with 3.5% of the trade income and applying the tax factor which differs

according to the specific municipality in Germany and equals 455% for the municipality of Potsdam.

Plurinuva is an Israeli tax resident

and is subject to corporate income tax at the rate of 23 %.

Carryforward losses for tax

As of June 30, 2022, Pluri had a U.S.

federal net operating loss carryforward for income tax purposes in the amount of $ 34,836 .

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.

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.

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.

Utilization of U.S.

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.

The Subsidiary has accumulated losses,

for tax purposes, as of June 30, 2022, 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.

In January 2018, Pluri registered as

an Israeli resident with the ITA and the Israeli Value Added Tax Authorities.

As of June 30, 2022, Pluri and the subsidiaries consolidated

accumulated losses, for tax purposes, are approximately $ 122,375 , which may be carried forward and offset against taxable business income

and business capital gain in the future for an indefinite period.

The German Subsidiary has accumulated

losses, for tax purposes, as of June 30, 2022, in the amount of approximately $ 588 , which may be carried forward and offset against taxable

business income and business capital gain in the future for an indefinite period.

AND ITS SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

Dollars in thousands (except share and per share amounts)

- TAXES ON INCOME (CONT.)

before income taxes

components of loss before income taxes are as follows:

Loss before income taxes

The components of loss before income

taxes are as follows:

Year ended June 30,

Consolidated loss of Pluristem Therapeutics and the Israeli subsidiary

Consolidated loss of Pluri and the Israeli subsidiaries

Pluristem GmbH

income taxes:

income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

Deferred income taxes:

Deferred income taxes reflect the net

tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts

used for income tax purposes.

Significant components of the Company’s deferred tax assets are as follows:

7 unchanged sentences

Net deferred tax asset

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.

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.

of June 30, 2021 and 2020, there were no unrecognized tax benefits that if recognized would affect the annual effective tax rate.

Reconciliation

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.

As of June 30, 2022 and 2021, 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.

The 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.

As of June 30, 2022 and 2021, there

were no unrecognized tax benefits that if recognized would affect the annual effective tax rate.

Reconciliation of taxes at the federal

statutory rate to Company’s provision for income taxes:

In 2022 and 2021, the main reconciling item of the statutory tax rate

of the Company ( 21 % to 23 %) to the effective tax rate ( 0 %) is tax loss carryforward and research and development credit carryforward 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