Summary of PLURISTEM THERAPEUTICS INC

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

Forward - Looking Statements

This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. Such forward-looking statements appear in this Item
2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," and include statements regarding our expectations regarding our short - and long-term capital requirements, progress in our efforts to begin clinical trials and achieve regulatory approvals, our expected milestones in the next 12 months and our outlook for the coming months, including our plans to raise additional non-dilutive funding. Our business and operations are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2008. Readers are also urged to carefully review and consider the various disclosures we have made in that report.

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

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

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

Going Concern

We have not generated revenues since our inception. Historically we have relied on private placement issuances and public offerings of equity and debt, as well as on governmental grants.

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

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

RESULTS OF OPERATIONS - NINE AND THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO NINE AND THREE MONTHS ENDED MARCH 31, 2008.

We have not generated any revenues, and we have negative cash flow from operations of $16,698,000 and have accumulated a deficit of $31,085,000 since our inception in May 2001. This negative cash flow is mostly attributable to research and development and general and administrative expenses. We anticipate that our operating expenses will increase as we intend to conduct detailed development of our products through animal pre-clinical trials and experiments and clinical trials. We estimate our operating cash expenses in the next 12 months to be approximately $6,000,000.

Research and Development

Research and development expenses net for the nine months ended March 31, 2009 decreased by 23% to $2,362,000 from $3,057,000 for the nine months ended March 31, 2008. The decrease is due to the decrease in stock-based compensation to employees and consultants in the amount of $989,000 as a result of a decrease in our stock price, and due to the increase in the participation by the Israeli Office of the Chief Scientist (the "OCS") as the grant for the previous 12 months was approved and recorded in December 2008. This decrease is partially offset by increasing expenses of subcontractors and materials as we are progressing with our research and development toward clinical trials.

Research and development expenses net for the three months ended March 31, 2009 decreased by 11% to $1,060,000 from $1,186,000 for the three months ended March 31, 2008. The decrease is due to the decrease in stock-based compensation to employees and consultants in the amount of $105,000 as a result of a decrease in our stock price and due to the decrease in a subcontractor's expenses mainly because such subcontractor was involved with the pre-clinical trials that were completed during the previous quarter.

General and Administrative

General and administrative expenses for the nine months ended March 31, 2009 decreased by 45% to $2,557,000 from $4,648,000 for the nine months ended March 31, 2008. The decrease in general and administrative expenses is primarily attributable to the decrease in stock-based compensation to employees and consultants that decreased from $2,499,000 to $926,000. In addition, there was a cut down in various expenses, mainly in expenses related to services provided by investor relations and public relations consultants.

General and administrative expenses for the three months ended March 31, 2009 decreased by 46% to $850,000 from $1,563,000 for the three months ended March 31, 2008. The decrease in general and administrative expenses is attributable to the decrease in stock-based compensation to employees and consultants that decreased from $841,000 to $301,000 and to the cut down in investor relations and public relations related expenses.

Financial Income, net

The decrease in financial income from $277,000 for the nine months ended March 31, 2008 to an expense of $150,000 for the nine months ended March 31, 2009, was as a result of the loss from sale of marketable securities in the first quarter of fiscal year 2009 and as a result of exchange rate expenses.

The financial income decreased from $131,000 for the three months ended March 31, 2008 to an expense of $84,000 for the three months ended March 31, 2009, as a result of gain from sale of marketable securities last year and an increase in exchange rate expenses this year.

Net Loss

Net loss for the nine and three months ended March 31, 2009 was $5,069,000 and $1,994,000, respectively, as compared to net loss of $7,428,000 and $2,618,000 for the nine and three months ended March 31, 2008. Net loss per share for the nine and three months ended March 31, 2009 was $0.52 and $0.17, respectively, as compared to $1.19 and $0.39 for the nine and three months ended March 31, 2008. In both cases, the net loss per share decreased as a result of the decrease in the net loss and the increase in our weighted average number of shares due to the issuance of additional shares in pursuant to equity issuances since March 31, 2008 as discussed further below.

Liquidity and Capital Resources

As of March 31, 2009, total current assets were $2,382,000 and total current liabilities were $652,000. On March 31, 2009, we had a working capital surplus of $1,730,000 and an accumulated deficit of $31,085,000. We finance our operations and plan to continue doing so with issuances of securities and with the participation of the OCS.

Cash and cash equivalents as of March 31, 2009 amounted to $1,724,000. This is an increase of $1,401,000 from the $323,000 reported as of June 30, 2008. We had marketable securities in the amount of $240,000 on March 31, 2009 as opposed to marketable securities in the amount of $1,185,000 that we had as of June 30, 2008. Cash balances increased in the nine months ended March 31, 2009 for the reasons presented below.

Operating activities used cash of $3,230,000 in the nine months ended March 31, 2009. Cash used by operating activities in the nine months ended March 31, 2009 primarily consisted of payments of salaries to our employees, and payments of fees to our consultants, subcontractors and professional services providers, less research and development grant participation by the OCS.

Investing activities provided cash of $597,000 in the nine months ended March 31, 2009. This resulted primarily from proceeds from sale of marketable securities in the amount of $1,113,000 during the first quarter of fiscal 2009, offset by purchase of marketable securities during the third quarter of Fiscal 2009in the amount of $240,000 and by costs associated with upgrading our facilities to Good Manufacturing Practice standard facilities in the amount of $308,000.

Financing activities generated cash of $4,034,000 during the nine months ended March 31, 2009 resulting primarily from receiving cash from investors related to the offerings described below.

On August 6, 2008, we sold 1,391,304 shares of our common stock and warrants to purchase 695,652 shares of common stock at an exercise price of $1.90 per share to two investors in consideration of $1,600,000 pursuant to terms of a securities purchase agreement. Rodman & Renshaw, LLC acted as placement agent, on a best efforts basis, for the offering and received a placement fee equal to 6% of the gross purchase price of the securities sold (excluding any consideration that may be paid in the future upon exercise of the warrants) as well as warrants to purchase 83,478 shares of common stock at an exercise price of $1.44 per share. Subject to Financial Industry Regulatory Authority ("FINRA") Rule 2710, the placement agent warrants may be exercised after six months through and including August 5, 2013. The offering was made pursuant to our effective shelf registration statement on Form S-3 (File No. 333-151761).

On September 22, 2008, we sold 900,000 shares of our common stock and warrants to purchase 675,000 shares of common stock to an investor in consideration for $1,035,000 pursuant to terms of a securities purchase agreement. The price per share of common stock was $1.15, and the exercise price of the warrants is $1.90. The warrants will be exercisable for a period of five years. The offering was made pursuant to our effective shelf registration statement on Form S-3 (File No. 333-151761). As part of this transaction, we paid a transaction fee to finders equal to 6% of the actual purchase price and issued, for no further consideration, warrants exercisable for five years at an exercise price of $1.50 per share to purchase 54,000 shares of our common stock.

During November 2008 through January 2009, we entered into securities purchase agreements with various investors, pursuant to which we sold 1,746,575 shares of our common stock at a price of $0.40 per share, for an aggregate purchase price of $698,630, and issued warrants to purchase up to an additional 1,746,575 shares of common stock with an exercise price of $1.00 per share. The warrants are exercisable after six months from the applicable closing date and will expire after five years from such date. Pursuant to the securities purchase agreements, the investors have the option, by notice to us no later than 10 business days following the release of an official announcement by us that it is initiating its first human clinical trials, to purchase an additional 931,507 shares of common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $698,630, and receive therewith warrants to purchase up to an additional 931,507 shares of common stock with an exercise price of $1.50 per share ("Option"). The Option is exercisable within six months from the applicable closing date. As part of this transaction, we paid a transaction fee to finders in an amount of $38,630 in cash and issued them warrants exercisable for five years at an exercise price of $1.00 per share to purchase 96,579 shares of our common stock.

In December 2008, we issued a total of 450,853 shares of our common stock to our employees and directors at a price per share of $0.40 per share. The issuance was made in exchange for a voluntary reduction in the cash compensation such officers and directors were due to receive from us in consideration for their services and in an effort to reduce our cash expenses.

On January 20, 2009, we sold 216,818 shares of our common stock and warrants to purchase 216,818 shares of common stock to investors in consideration for $95,400 pursuant to terms of a securities purchase agreement. The price per share of common stock was $0.44, and the exercise price of the warrants is $1.00 per share. The warrants will be exercisable after six months from the closing date and will expire after five years. Pursuant to the agreement, the investors have the option, by notice to us no later than 10 business days following the release of an official announcement by us that it is initiating its first human clinical trials, to purchase an additional 127,200 shares of common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $95,400, and receive therewith warrants to purchase up to an additional 127,200 shares of common stock with an exercise price of $1.50 per share (the "January 20 Option"). The January 20 Option is exercisable within six months from the closing date. As part of this transaction, we paid a transaction fee to finders in an amount of $5,400 in cash and issued them warrants exercisable for two years at an exercise price of $1.00 per share to purchase 12,273 shares of our common stock.

On January 29, 2009, we entered into a subscription agreement with certain investors, pursuant to which we sold to such investors 969,826 units, each unit consisting of one share of common stock and a warrant to purchase one share of our common stock exercisable 181 days following the issuance thereof for a period of five years thereafter at an exercise price of $1.90 per share (the "Units"). The purchase price per Unit was $1.16 and the aggregate purchase price for such Units was $1,125,000. As part of this transaction, we paid a transaction fee to finders in an amount of $89,546 in cash and issued these investors warrants to purchase 80,983 shares of our common stock, exercisable after six months for five years at an exercise price of $1.90 per share.

On May 5, 2009, we entered into securities purchase agreements with two investors pursuant to which we sold 888,406 shares of our common stock and warrants to purchase 488,623 shares of common stock in consideration for $1,332,610. The exercise price of the warrants is $1.96 and they will be exercisable for a period of five years commencing six months following the issuance thereof. Rodman & Renshaw, LLC acted as placement agent, on a best efforts basis, for the offering and received a placement fee equal to 6% of the gross purchase price of the securities sold (excluding any consideration that may be paid in the future upon exercise of the warrants) as well as warrants to purchase 53,304 shares of common stock at an exercise price of $1.875 per share. Subject to FINRA Rule 2710, the placement agent's warrants may be exercised after six months through and including May 5, 2014. The offering was made pursuant to our effective shelf registration statement on Form S-3 (File No. 333-151761).

We do not expect to generate revenues from sales of products in the next 12 months. We may generate revenues from the sale of licenses to use our technology. Our products will likely not be ready for sale for at least three years, if at all.

Outlook

In our management's opinion, we expect to achieve the following events or milestones in the next 12 months in order for us to begin generating revenues as planned in three years or more:

- Scaling up of our 3-D PluriXTM Bioreactor, increasing the manufacturing volume production per Bioreactor run and bringing them to commercial capabilities.

- Start the first Phase I clinical trial in the U.S.A. for the treatment of critical limb ischemia using our PLX-PAD.

- Start the first Phase I clinical trial in Europe with the PLX-PAD after the PEI (Paul Ehrlich Institute) approval, or the IMPD (Investigational Medicinal Product Dossier).

- Obtaining pre-clinical data in additional clinical indication.

On March 2, 2009, we announced that the U.S. Food and Drug Administration has cleared our Investigational New Drug application to initiate a Phase I clinical trial for the treatment of critical limb ischemia using our PLX-PAD product.

In addition to raising funds by way of issuance of equity and debt as set forth above, we are seeking ways to raise non-diluting funds. One of such sources is the OCS who has supported our activity in the past three years. We submitted an application for a new grant to the OCS in March 2009 (the "R&D Grant"). We believe that the funds we may have if the R&D Grant is approved together with the funds we have received from the investments recently made in our equity will be sufficient for operating for approximately 12 months. In addition, we have filed grant applications with the U.S. National Institutes of Health. There can be no assurance that we will receive these grants. Management believes that we will need to raise additional funds before we have any cash flow from operations. We believe that it will take several years for us to complete the approval process for our products in the United States, Europe or any other jurisdiction. In addition, future decisions regarding any acquisitions that we may choose to make or expanded product development, as to which there can be no assurance of success, will require additional capital, which must be raised through the issuance of additional securities and/or incurring debt. There can be no assurance, however, that acceptable financing to fund our ongoing operations can be obtained on suitable terms, if at all. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders could lose their entire investment in the company.

Off Balance Sheet Arrangements

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