UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
Form 10-Q
 
(Mark One)
 
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended  March 31, 2019
 
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
For the transition period from __________ to __________
 
Commission file number  001-31392
 
PLURISTEM THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)

Nevada
 
98-0351734
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

MATAM Advanced Technology Park, Building No. 5, Haifa, Israel  3508409
(Address of principal executive offices)

011-972-74-7108600
(Registrant’s telephone number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     
 
Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration was required to submit files).   
 
Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 
 
 
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ☐     No ☒
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.00001
PSTI
Nasdaq Capital Market

State the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 149,788,196   shares of common stock issued and outstanding as of May 2, 2019.

PART I - FINANCIAL INFORMATION
 
Item 1.  Financial Statements.
 
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
 
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2019

(Unaudited)
 
2
 
                           PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2019

 U.S. DOLLARS IN THOUSANDS

(Unaudited)
 
INDEX
 
 
 
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands (except share and per share data)
 
         
March 31, 2019
   
June 30,
2018
 
   
Note
   
Unaudited
       
ASSETS
                 
                   
CURRENT ASSETS:
                 
                     
Cash and cash equivalents
         
$
9,535
   
$
8,821
 
Short-term bank deposits
           
1,002
     
21,079
 
Restricted cash and short-term bank deposits
           
703
     
687
 
Accounts receivable from the Israeli Innovation Authority (“IIA”)
           
285
     
58
 
Other current assets
           
1,671
     
1,391
 
Total current assets
           
13,196
     
32,036
 
                         
LONG-TERM ASSETS:
                       
                         
Long-term deposits and restricted bank deposits
           
391
     
383
 
Severance pay fund
           
872
     
846
 
Property and equipment, net
           
4,265
     
5,678
 
Other long-term assets
           
7
     
17
 
Total long-term assets
           
5,535
     
6,924
 
                         
Total assets
         
$
18,731
   
$
38,960
 
 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 2


PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands (except share and per share data)
         
March 31,
2019
   
June 30,
2018
 
   
Note
   
Unaudited
       
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
                   
CURRENT LIABILITIES
                 
                   
Trade payables
       
$
2,892
   
$
3,261
 
Accrued expenses
         
3,342
     
2,266
 
Other accounts payable
         
2,013
     
3,021
 
Total current liabilities
         
8,247
     
8,548
 
                       
LONG-TERM LIABILITIES
                     
                       
Accrued severance pay
         
1,152
     
1,127
 
Other long-term liabilities
         
705
     
778
 
Total long-term liabilities
         
1,857
     
1,905
 
                       
COMMITMENTS AND CONTINGENCIES
   
5
                 
                         
STOCKHOLDERS’ EQUITY
                       
                         
Share capital:
   
6
                 
 Common stock $0.00001 par value per share: Authorized: 200,000,000 shares
 Issued and outstanding: 119,319,660 shares as of 
 March 31, 2019, 113,565,780 shares as of June 30, 2018
           
1
     
1
 
Additional paid-in capital
           
251,870
     
244,203
 
Accumulated deficit
           
(243,244
)
   
(215,697
)
Total stockholders' equity
           
8,627
     
28,507
 
                         
Total liabilities and stockholders' equity
         
$
18,731
   
$
38,960
 
 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 3

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
 
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
U.S. Dollars in thousands (except share and per share data)
 
         
Nine months ended
March 31,
   
Three months ended
March 31,
 
   
Note
   
2019
   
2018
   
2019
   
2018
 
                               
Revenues
       
$
54
   
$
50
   
$
-
   
$
-
 
Cost of revenues
         
(2
)
   
(2
)
   
-
     
-
 
Gross profit
         
52
     
48
     
-
     
-
 
Operating Expenses:
                                     
Research and development expenses
         
(23,618
)
   
(18,932
)
   
(8,421
)
   
(7,481
)
Less: participation by the IIA and other parties
         
2,771
     
2,235
     
594
     
1,099
 
Research and development expenses, net
         
(20,847
)
   
(16,697
)
   
(7,827
)
   
(6,382
)
General and administrative expenses, net
         
(6,806
)
   
(8,349
)
   
(2,473
)
   
(2,666
)
Other income
   
7
     
-
     
43
     
-
     
-
 
                                         
Operating loss
           
(27,601
)
   
(24,955
)
   
(10,300
)
   
(9 , 048
)
                                         
Financial income, net
           
54
     
7,810
     
222
     
7,517
 
                                         
Net loss for the period
         
$
(27,547
)
 
$
(17,145
)
 
$
(10,078
)
 
$
(1,531
)
                                         
Loss per share:
                                       
Basic and diluted net loss per share
         
$
(0.24
)
 
$
(0.16
)
 
$
(0.09
)
 
$
(0.01
)
                                         
Weighted average number of shares used  in computing basic and diluted net loss per share
           
115,542,598
     
104,107,748
     
117,225,522
     
110,044,458
 
 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 4
 
  PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
U.S. Dollars in thousands
 
   
Nine months ended
March 31,
   
Three months ended
March 31,
 
   
2019
   
2018
   
2019
   
2018
 
Net loss
 
$
(27,547
)
 
$
(17,145
)
 
$
(10,078
)
 
$
(1,531
)
Other comprehensive income, net:
                               
Unrealized gain on available-for-sale marketable securities, net
   
-
     
6,441
     
-
     
2,134
 
Reclassification adjustment of available-for-sale marketable securities losses realized in net loss, net
   
-
     
(8,440
)
   
-
     
(7,512
)
Other comprehensive income
   
-
     
(1,999
)
   
-
     
(5,378
)
Total comprehensive loss
 
$
(27,547
)
 
$
(19,144
)
 
$
(10,078
)
 
$
(6,909
)

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 5
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' E QUITY
U.S. Dollars in thousands (except share and per share data)

   
Common Stock
   
Additional Paid-in
   
Accumulated Other Comprehensive
   
Accumulated
   
Total Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Income
   
Deficit
   
Equity
 
Balance as of July 1, 2017
   
96,938,789
   
$
1
   
$
217,822
   
$
1,999
   
$
(189,571
)
 
$
30,251
 
Exercise of options by employees
   
9,107
     
-
     
8
     
-
     
-
     
8
 
Stock-based compensation to employees, directors and non-employee consultants
   
2,330,380
     
(*
)
   
4,895
     
-
     
-
     
4,895
 
Issuance of common stock under At Market Issuance Sales Agreement, net of issuance costs of $124 (Note 6a)
   
1,760,840
     
(*
)
   
2,412
     
-
     
-
     
2,412
 
Issuance of common stock, net of issuance costs of $1,405 (Note 6c)
   
9,000,000
     
(*
)
   
13,646
     
-
     
-
     
13,646
 
Exercise of warrants by investors   (Note 6d)
   
828,703
     
(*
)
   
1,160
     
-
     
-
     
1,160
 
Other comprehensive income, net
   
-
     
-
     
-
     
(1,999
)
   
-
     
(1,999
)
Net loss
   
-
     
-
     
-
     
-
     
(17,145
)
   
(17,145
)
                                                 
Balance as of March 31, 2018 (unaudited)
   
110,867,819
   
$
1
   
$
239,943
   
$
-
   
$
(206,716
)
 
$
33,228
 
 
(*)  Less than $1

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

F - 6
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. Dollars in thousands (except share and per share data)
 
   
Common Stock
   
Additional Paid-in
   
Accumulated Other Comprehensive
   
Accumulated
   
Total Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Income
   
Deficit
   
Equity
 
Balance as of January 1, 2018
   
109,337,556
   
$
1
   
$
236,767
   
$
5,378
   
$
(205,185
)
 
$
36,961
 
Exercise of options by employees
   
4,107
     
-
     
3
     
-
     
-
     
3
 
Stock-based compensation to employees, directors and non-employee consultants
   
599,356
     
(*
)
   
1,787
     
-
     
-
     
1,787
 
Issuance of common stock under At Market Issuance Sales Agreement, net of issuance costs of $44 (Note 6a)
   
926,800
     
(*
)
   
1,386
     
-
     
-
     
1,386
 
Other comprehensive income, net
   
-
     
-
     
-
     
(5,378
)
   
-
     
(5,378
)
Net loss
   
-
     
-
     
-
     
-
     
(1,531
)
   
(1,531
)
                                                 
Balance as of March 31, 2018 (unaudited)
   
110,867,819
   
$
1
   
$
239,943
   
$
-
   
$
(206,716
)
 
$
33,228
 
 
(*)  Less than $1
 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 7
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. Dollars in thousands (except share and per share data)
 
   
Common Stock
   
Additional Paid-in
   
Accumulated
   
Total Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity
 
Balance as of July 1, 2018
   
113,565,780
   
$
1
   
$
244,203
   
$
(215,697
)
 
$
28,507
 
Stock-based compensation to employees, directors and non-employee consultants
   
2,011,380
     
(*
)
   
3,949
     
-
     
3,949
 
Issuance of common stock under At Market Issuance Sales Agreement, and Open Market Sales Agreement, net of issuance costs of $357 (Note 6a,   6b)
   
3,724,000
     
(*
)
   
3,710
     
-
     
3,710
 
Exercise of options by employees and  non-employee consultants
   
18,500
     
(*
)
   
8
     
-
     
8
 
Net loss
   
-
     
-
     
-
     
(27,547
)
   
(27,547
)
                                         
Balance as of March 31, 2019 (unaudited)
   
119,319,660
   
$
1
   
$
251,870
   
$
(243,244
)
 
$
8,627
 
 
(*)  Less than $1

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 8
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. Dollars in thousands (except share and per share data)
 
   
Common Stock
   
Additional Paid-in
   
Accumulated
   
Total Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity
 
Balance as of January 1, 2019
   
116,809,444
   
$
1
   
$
248,359
   
$
(233,166
)
 
$
15,194
 
Stock-based compensation to employees, directors and non-employee consultants
   
492,216
     
(*
)
   
1,753
     
-
     
1,753
 
Issuance of common stock under Open Market Sales Agreement, net of issuance costs of $209 (Note   6b)
   
2,018,000
     
(*
)
   
1,758
     
-
     
1,758
 
Net loss
   
-
     
-
     
-
     
(10,078
)
   
(10,078
)
                                         
Balance as of March 31, 2019 (unaudited)
   
119,319,660
   
$
1
   
$
251,870
   
$
(243,244
)
 
$
8,627
 
 
(*)  Less than $1
 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 9
 
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
 
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. Dollars in thousands
 
   
Nine months ended March 31,
 
   
2019
   
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
             
Net loss
 
$
(27,547
)
 
$
(17,145
)
                 
Adjustments to reconcile net loss to net cash used in operating activities:
               
                 
Depreciation
   
1,481
     
1,512
 
Accretion of discount, amortization of premium and changes in accrued interest of marketable securities
   
-
     
11
 
 Gain from sale of investments of available-for-sale marketable securities
   
-
     
(8,440
) 
 Other-than-temporary loss of available-for-sale marketable securities (see Note 3)
   
-
     
850
 
Stock-based compensation to employees, directors and non-employee consultants
   
3,949
     
4,895
 
Decrease (increase) in accounts receivable from the IIA
   
(227
)
   
440
 
Decrease (increase) in other current assets and other long-term assets
   
(270
)
   
281
 
Decrease in trade payables
   
(220
)
   
(13
)
Increase (decrease) in other accounts payable, accrued expenses, other current liabilities and other long-term liabilities
   
(112
)
   
2,256
 
 Decrease (increase) in interest receivable on short-term deposits
   
168
     
(319
)
Linkage differences and interest on short and long-term  deposits and restricted bank deposits
   
(1
)
   
4
 
Accrued severance pay, net
   
(1
)
   
74
 
Net cash used by operating activities
 
$
(22,780
)
 
$
(15,594
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
                 
Purchase of property and equipment
 
$
(217
)
 
$
(219
)
Proceeds from (investment in) short-term deposits
   
19,908
     
(20,321
)
Investment in long-term deposits and restricted bank deposits
   
(6
)
   
-
 
Proceeds from sale of available-for-sale marketable securities
   
-
     
21,881
 
Proceeds from redemption of available-for-sale marketable securities
   
-
     
9
 
Investment in available-for-sale marketable securities
   
-
     
(1,146
)
Net cash provided by investing activities
 
$
19,685
   
$
204
 
 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 10
 
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. Dollars in thousands
 
   
Nine months ended March 31,
 
   
2019
   
2018
 
CASH FLOWS FROM FINANCING ACTIVITIES:
           
             
Proceeds related to issuance of common stock, net of issuance costs
 
$
3,710
   
$
16,058
 
Exercise of warrants and options
   
8
     
1,168
 
Proceeds with respect to Israel-United States Binational Industrial
     Research and Development Foundation liability
   
107
     
88
 
Net cash provided by financing activities
 
$
3,825
   
$
17,314
 
                 
Increase in cash and cash equivalents and restricted cash
   
730
     
1,924
 
Cash and cash equivalents and restricted cash at the beginning of the period
   
9,508
     
4,707
 
Cash and cash equivalents and restricted cash at the end of the period
 
$
10,238
   
$
6,631
 
(a) Supplemental disclosure of cash flow activities:
               
Cash paid during the period for:
               
Taxes paid due to non-deductible expenses
 
$
7
   
$
8
 
                 
(b) Supplemental disclosure of non-cash activities:
           
Purchase of property and equipment on credit
 
$
22
   
$
59
 

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
 
F - 11

PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

N OTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 1:-GENERAL
 
a.
Pluristem Therapeutics Inc., a Nevada corporation, was incorporated on May 11, 2001. Pluristem Therapeutics Inc. has a wholly owned subsidiary, Pluristem Ltd. (the “Subsidiary”), which is incorporated under the laws of the State of Israel. Pluristem Therapeutics Inc. and the Subsidiary are referred to as the “Company” or “Pluristem”.
 
The Company’s shares of common stock are traded on the Nasdaq Capital Market under the symbol “PSTI” and on the Tel-Aviv Stock Exchange under the symbol “PLTR”.
 
b.
The Company is a bio-therapeutics company developing placenta-based cell therapy product candidates for the treatment of multiple ischemic and inflammatory conditions. The Company has incurred an accumulated deficit of approximately $243,244 and incurred recurring operating losses and negative cash flows from operating activities since inception. As of March 31, 2019, the Company’s total stockholders' equity amounted to $8,627.
 
During the nine month period ended March 31, 2019, the Company incurred operating losses of $27,601 and its negative cash flow from operating activities was $22,780. The Company will be required to identify additional liquidity resources in the near term in order to support the commercialization of its products and maintain its research and development and clinical trials activities.
 
As of March 31, 2019, the Company's cash position (cash and cash equivalents and short-term bank deposits) totaled approximately $10,537. The Company is addressing its liquidity issues by implementing initiatives to allow the continuation of its activities. The Company's current operating plan includes various assumptions concerning the level and timing of cash outflows for operating activities and capital expenditures. The Company's ability to successfully carry out its business plan, which includes a cost-reduction plan should it be unable to raise sufficient additional capital, is primarily dependent upon its ability to (1) obtain sufficient additional capital, (2) enter into license agreements to use or commercialize the Company’s products and (3) receive other sources of funding, including non-diluting sources such as the IIA grants, the European Union's Horizon 2020 program (“Horizon 2020”) grants and other grants. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of its products.
 
According to management estimates, liquidity resources as of March 31, 2019, together with the funds received from the public offering and registered direct offering that closed on April 8, 2019 (see Note 8), will be sufficient to maintain the Company's operations into the beginning of the fourth quarter of the Company's fiscal year 2020. The Company's inability to raise funds to carry out its business plan will have a severe negative impact on its ability to remain a viable company.
 
CHA Agreement
On June 26, 2013, Pluristem entered into an exclusive license and commercialization agreement (the “CHA Agreement”) with CHA Biotech Co. Ltd. (“CHA”), for conducting clinical trials and commercialization of Pluristem's PLX-PAD product in South Korea in connection with two indications: the treatment of Critical Limb Ischemia (“CLI”), and Intermediate Claudication (collectively with CLI, the “Indications”). Under the terms of the CHA Agreement, CHA will receive exclusive rights in South Korea for conducting clinical trials with respect to the Indications and the Company will continue to retain rights to its proprietary manufacturing technology and cell-related intellectual property.

The first clinical study as part of the CHA Agreement is a Phase II trial in Intermittent Claudication. South Korea’s Ministry of Food and Drug Safety approved this study in November 2013.
 
F - 12
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)

NOTE 1:-GENERAL (CONT.)

Upon the first regulatory approval for a PLX product in South Korea, for the specified Indications, Pluristem and CHA will establish an equally owned joint venture to commercialize PLX cell products in South Korea. Pluristem will be able to use the data generated by CHA to pursue the development of PLX product candidates outside of South Korea.

The CHA Agreement contains customary termination provisions, including in the event the parties do not reach an agreement upon development plan for conducting the clinical trials. Upon termination of the CHA Agreement, the license granted thereunder will terminate and all rights included therein will revert to the Company, and the Company will be free to enter into agreements with any other third parties for the granting of a license in or outside South Korea or to deal in any other manner with such rights as it shall see fit at its sole discretion.

In addition, and as contemplated by the CHA Agreement, in December 2013, Pluristem and CHA executed the mutual investment pursuant to which Pluristem issued 2,500,000 shares of its common stock in consideration for 1,011,504 shares of CHA, which reflects total consideration to each of Pluristem and CHA of approximately $10,414. The parties also agreed to give an irrevocable proxy to the other party’s management with respect to the voting power of the shares issued.

In March 2015, the Company sold a portion of the CHA shares received in December 2013. In January 2018, the Company sold its remaining investment in the CHA shares, for aggregate net proceeds of approximately $10,500, representing a net gain of $6,200, which is recorded in “Financial income, net” for the fiscal year ended June 30, 2018, and reclassified from other comprehensive loss.

Chart Industries Agreement
In November 2018, the Company entered into a license agreement with a subsidiary of Chart Industries, Inc. ("Chart") regarding the Company’s thawing device for cell-based therapies. Pursuant to the terms of the agreement, Chart obtained the exclusive rights to manufacture and market the thawing device in all territories worldwide, excluding Greater China, and the Company is to receive royalties from sales of the product and supply of an agreed upon number of thawing devices.   Royalties shall commence on the date of Chart’s first commercial sale of the thawing device. As of March 31, 2019, commercial sale of the thawing device has not yet begun.
 
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES
 
a.
Unaudited Interim Financial Information
 
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed).
 
For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018.
 
Operating results for the three and nine month periods ended March 31, 2019, are not necessarily indicative of the results that may be expected for the year ending June 30, 2019.
 
F - 13
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)
 
b.
Significant Accounting Policies
 
The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.
 
c.
Use of estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments and assumptions that are reasonable based upon information available at the time they are made.
 
These estimates, judgments and assumptions can affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
d.
Fair value of financial instruments
 
The carrying amounts of the Company's financial instruments, including cash and cash equivalents, short-term and restricted bank deposits, accounts receivable and other current assets, trade payable and other accounts payable, accrued expenses and other liabilities, approximate fair value because of their generally short term maturities.
 
The Company measures its investments in marketable securities and derivative instruments at fair value under Accounting Standards Codification (“ASC”), “Fair Value Measurements and Disclosures” (“ASC 820”). Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
 
 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; and
 
 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 fair value. The Company categorized each of its fair value measurements in one of these three levels of hierarchy (see Note 4).
 
e .
Derivative financial instruments
 
The Company accounts for derivatives and hedging based on ASC 815, “Derivatives and hedging” (“ASC 815”) , as amended and related interpretations. ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value.

F - 14
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)
 
If a derivative meets the definition of a hedge and is so designated, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings (for fair value hedge transactions) or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings (for cash flow hedge transactions).

The ineffective portion of a derivative's change in fair value is recognized in earnings. If a derivative does not meet the definition of a hedge, the changes in the fair value are included in earnings. Cash flows related to such hedges are classified as operating activities.

The Company enters into forward exchange contracts and option contracts in order to limit the exposure to exchange rate fluctuation associated with expenses mainly incurred in New Israeli Shekels (“ NIS ”) . Since the derivative instruments that the Company holds do not meet the definition of hedging instruments under ASC 815, any gain or loss derived from such instruments is recognized immediately as "financial income, net".

The Company measured the fair value of the contracts in accordance with ASC 820. Foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

As of March 31, 2019, the fair value of the   options contracts was less than $1, and is presented in “other accounts payable” (see Note 4). The net income (loss) recognized in “Financial income, net” during the three and nine month periods ended March 31, 2019 and 2018 was $348, $243 and ($75), ($292), respectively.
 
f.
Recently Adopted Accounting Pronouncement
 
ASU No. 2016-18 – "Statement of Cash Flows" (Topic 230) (“ASU No. 2016-18”):
 
In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18. The ASU requires that the consolidated statement of cash flows include the change in total cash and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. ASU No. 2016-18 also requires a reconciliation between the total of cash and cash equivalents and restricted cash presented on the consolidated statement of cash flows and the cash and cash equivalents balance presented on the consolidated balance sheet. ASU No. 2016-18 was effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The standard requires application using a retrospective transition method.  The Company adopted this standard effective July 1, 2018 using the retrospective transition method, as required by the new standard.

F - 15
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

The following table provides a reconciliation of cash and cash equivalents, and long term restricted cash reported within the consolidated balance sheets that sum to the total of such amounts in the consolidated statements of cash flows:

   
Nine months ended
March 31,
 
   
2019
   
2018
 
   
(Unaudited)
 
Cash and cash equivalents
 
$
9,535
   
$
5,940
 
Restricted cash included in Restricted cash and short-term bank deposits
   
703
     
691
 
Cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows
 
$
10,238
   
$
6,631
 
 
Recently Issued Accounting Pronouncements
 
ASU No. 2016-02 - “Leases” (“Topic 842”):
 
In February 2016, the FASB issued guidance on the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether a lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in a manner similar to the accounting treatment requirements under existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. Topic 842 supersedes the previous leases standard, ASC 840, “Leases”. The guidance is effective for annual periods beginning on or after December 15, 2018, or July 1, 2019 for the Company, and interim periods within those fiscal years with early adoption permitted. Early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach.
 
In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)", which further updated Topic 842. This update provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented.
 
If elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
 
The Company is currently evaluating the potential impact of the guidance on its consolidated financial statements.
 
F - 16
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)
 
  ASU No. 2017-12 - “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities” (“ASU No. 2017-12”):
 
In August 2017, the FASB issued ASU No. 2017-12, which is intended to simplify and amend the application of hedge accounting to more clearly portray the economics of an entity’s risk management strategies in its financial statements. The ASU will make more financial and nonfinancial hedging strategies eligible for hedge accounting, reduce complexity in fair value hedges of interest rate risk and ease certain documentation and assessment requirements of hedge effectiveness. It also changes how companies assess effectiveness of the hedge and amends the presentation and disclosure requirements relating to hedging activities. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, or July 1, 2019, for the Company. The Company is currently evaluating the potential impact of adopting the ASU on its consolidated financial statements.

  ASU No. 2018-07 - “Compensation—Stock Compensation” (Topic 718) (“ASU No. 2018-07”):

In June 2018, the FASB issued ASU No. 2018-07. The ASU expands the scope of ASU No. 2018-07 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply ASU No. 2018-07 to nonemployee awards except with respect to option pricing models and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that ASU No. 2018-07 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. ASU No. 2018-07 is effective for fiscal years beginning after December 15, 2018, or July 1, 2019 for the Company, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the potential impact of the guidance on its consolidated financial statements.

  ASU No. 2018-18 - “Collaborative Arrangements (Topic 808) - Clarifying the Interaction between Topic 808 and Topic 606” (“ASU No. 2018-18”):

In November 2018, the FASB issued ASU No. 2018-18, which clarifies the interaction between Topic 808 and Topic 606 by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for under Topic 606, (2) adding unit-of-account guidance in Topic 808 to align with the guidance in Topic 606, and (3) clarifying presentation guidance for transactions with a collaborative arrangement participant that are not accounted for under Topic 606. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, or July 1, 2019 for the Company . The Company is currently evaluating the impact of adopting the ASU on its consolidated financial statements.

F - 17
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 3:- MARKETABLE SECURITIES
 
During the year ended June 30, 2018, the Company sold marketable securities for aggregate net proceeds (including redemptions of certain bonds) of approximately $21,890, representing a net gain of $8,440. The proceeds from the sale of such marketable securities are included in “Financial income, net”, for the year ended June 30, 2018.
 
In addition, during the year ended June 30, 2018, the Company recognized an-other-than-temporary impairment loss on an outstanding security of $850, and the value of the outstanding security was amortized in full.
 
NOTE 4:- FAIR VALUE OF FINANCIAL INSTRUMENTS
 
 
March 31, 2019 (Unaudited)
   
June 30, 2018
 
   
Level 1
   
Level 2
   
Level 1
   
Level 2
 
Foreign currency derivative instruments
 
$
-
   
$
(*
)
 
$
-
   
$
(243
)
Total financial liabilities
 
$
-
   
$
(*
)
 
$
-
   
$
(243
)

(*)  Less than $1

NOTE 5: - COMMITMENTS AND CONTINGENCIES
 
a.
As of March 31, 2019, an amount of $1,084 of cash and deposits was pledged by the Subsidiary to secure the derivatives and hedging transactions, credit line and bank guarantees.
 
b.
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 year. Following the full repayment of the grant, there is no further liability for royalties.
 
Through March 31, 2019, total grants obtained from the IIA aggregated to approximately $27,096 and total royalties paid and accrued amounted to $170. As of March 31, 2019, the Company's contingent liability in respect to royalties to the IIA amounted to $26,926, not including LIBOR interest as described above.
 
c.
The Company was 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.
 
 
F - 18
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 5: - COMMITMENTS AND CONTINGENCIES (CONT.)
 
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 March 31, 2019, total grants obtained under this Smart Money program amounted to approximately $112. As of March 31, 2019, the Company's contingent liability with respect to royalties for this “Smart Money” program was $112 and no royalties were paid or accrued.
 
d.
The Company was awarded an additional “Smart Money” grant of approximately $229 from Israel’s Ministry of Economy and Industry to facilitate certain marketing and business development activities with respect to its advanced cell therapy products in the Chinese market, including Hong Kong. The Israeli government granted the Company budget resources that are intended to be used to advance the Company’s product candidate towards marketing in the China-Hong Kong markets.
 
The Company will also receive close support from Israel’s trade representatives stationed in China, including Hong Kong, along with experts appointed by the Smart Money program. As part of the program, the Company will repay royalties of 5% from the Company’s revenues in the region for a five year period, beginning the year in which the Company will not be entitled to reimbursement of expenses under the program and will be spread for a period of up to 5 years or until the amount of the grant is fully paid .
 
As of March 31, 2019, the aggregate amount of grant obtained from this Smart Money program was approximately $26. As of March 31, 2019, the Company's contingent liability with respect to royalties for this “Smart Money” program is $26 and no royalties were paid or accrued.
 
e.
In September 2017, the Company signed an agreement with the Tel-Aviv Sourasky Medical Center (Ichilov Hospital) to conduct a Phase I/II trial of PLX-PAD cell therapy for the treatment of Steroid-Refractory Chronic Graft-Versus-Host-Disease (“GvHD”).
 
As part of the agreement with 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 GvHD, with a maximum aggregate royalty amount of approximately $250.
 
f.
The Company currently collaborates with the New York Blood Center (“NYBC”) on preclinical studies of its placental expanded R-18 cells (“PLX-R18”) to enhance the efficacy of umbilical cord blood transplantation. The project was selected to receive a conditional award of $900 from the Israel-United States Binational Industrial Research and Development Foundation (the “BIRD Foundation”), of which an amount of $585 is a direct grant allocated to the Company. Per the terms of the project, the Company will provide the PLX-R18 cells and the NYBC will be responsible for conducting and supporting the studies. Amounts received in connection with this award are presented in “Other long-term liabilities”, as the Company does not expect to repay the liability in the next 12 months. In accordance with the agreement between the Company and NYBC, if only one party elects to proceed with the development of the product, such party shall be responsible for all repayment obligations to the BIRD Foundation for both parties, if applicable.
 
 
F - 19
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 5: - COMMITMENTS AND CONTINGENCIES (CONT.)
 
In addition, in case of conclusion of project development which will trigger the grant repayment to the BIRD Foundation, if the Company will elect to pursue the development of the product, and NYBC elects not to pursue the development of the product, then, unless otherwise agreed by the parties, the Company shall pay NYBC royalties in the amount of 2.5% from its revenues of the product, up to an aggregate royalty amount of approximately $550. As of March 31, 2019, total grants obtained from the BIRD Foundation amounted to approximately $264 and is presented in “other long-term liabilities.”
 
g.
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. market. 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 March 31, 2019, total grants obtained under the “Shalav” program amounted to approximately $40. As of March 31, 2019, the Company's contingent liability with respect to royalties for this “Shalav” program was $40 and no royalties were paid or accrued.
 
NOTE 6: - STOCKHOLDERS' EQUITY
 
a.
Pursuant to a shelf registration on Form S-3 declared effective by the Securities and Exchange Commission on June 23, 2017, in July 2017 the Company entered into an At Market Issuance Sales Agreement (“ATM Agreement”) with FBR Capital Markets & Co., MLV & Co. LLC and Oppenheimer & Co. Inc. (collectively, the “Agents”), which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell shares of common stock having an aggregate offering price of up to $80,000 through the Agents acting as sales agent. During the nine month period ended March 31, 2019, the Company sold 1,706,000 shares of common stock under the ATM Agreement at an average price of $1.23 per share for aggregate net proceeds of approximately $1,952, net of issuance expenses of $148.
 
On February 4, 2019, the Company notified the Agents of the termination of the ATM Agreement.

b.
Pursuant to a shelf registration on Form S-3 declared effective by the Securities and Exchange Commission on June 23, 2017, in February 6, 2019 the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) which provides that, upon the terms and subject to the conditions and limitations in the sales agreement, the Company may elect, from time to time, to offer and sell shares of common stock having an aggregate offering price of up to $50,000 through Jefferies acting as sales agent. During the nine month period ended March 31, 2019, the Company sold 2,018,000 shares of common stock under the Sales Agreement at an average price of $0.97 per share for aggregate net proceeds of approximately $1,758, net of issuance expenses of $209.


F - 20
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 6: - STOCKHOLDERS' EQUITY (CONT.)

c.
On October 31, 2017, the Company completed a public offering in Israel, pursuant to the Company’s existing shelf registration statement on Form S-3 in the United States and a shelf registration statement filed in Israel, pursuant to which the Company raised aggregate gross proceeds of $15,051 through the sale of 9,000,000 shares of the Company’s common stock at a purchase price of NIS 5.90 (approximately $1.67) per share. The net proceeds, after deducting fees and expenses related to the offering, were approximately $13,646.

d.
Through the nine month period ended March 31, 2018, a total of 828,703 warrants were exercised by investors at an exercise price of $1.40 per share, resulting in the issuance of 828,703 shares of common stock for net proceeds of approximately $1,160.

e.
Options, restricted stocks (“RS”) and restricted stock units (“RSU”) to employees, directors and consultants:
 
1.
Options to employees and directors:
 
The Company accounts for its options to employees and directors under the fair value method in accordance with ASC 718, “Compensation—Stock Compensation” (“ASC 718”). A summary of the Company’s activity for options granted to employees and directors under its 2005 incentive option plan is as follows:
 
   
Nine months ended March 31, 2019 (Unaudited)
 
   
Number
   
Weighted Average Exercise Price
 
Options outstanding at beginning of period
   
315,000
   
$
0.62
 
Options forfeited
   
(307,500
)
 
$
0.62
 
Options exercised
   
(7,500
)
 
$
0.62
 
Options outstanding at end of the period
   
-
     
-
 



F - 21


PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 6: - STOCKHOLDERS' EQUITY (CONT.)

e.
Options, restricted stocks and restricted stock units to employees,   directors and consultants (cont.):

2.
Options to non-employees:

The Company accounts for its options to non-employees under the fair value method in accordance with ASC 718. A summary of the options to non-employee consultants under its 2005 and 2016 incentive option plans is as follows:

   
Nine months ended March 31, 2019 (Unaudited)
 
   
Number
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Terms (in years)
   
Aggregate Intrinsic Value Price
 
Options outstanding at beginning of period
   
500,600
   
$
0.01
     
-
     
-
 
Options granted
   
548,050
     
-
     
-
     
-
 
Options exercised
   
(11,000
)
   
0.28
     
-
     
-
 
Options forfeited
   
(1,850
)
   
-
     
-
     
-
 
Options outstanding at end of the period
   
1,035,800
   
$
-
     
8.10
   
$
995
 
                                 
Options exercisable at the end of the period
   
353,041
   
$
-
     
7.10
   
$
342
 
Options vested  and expected to vest
   
1,035,800
   
$
-
     
8.10
   
$
995
 

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

   
Nine months ended
March 31,
   
Three months ended
March 31,
 
   
2019
   
2018
   
2019
   
2018
 
   
(Unaudited)
   
(Unaudited)
 
Research and development expenses
 
$
229
   
$
29
   
$
132
   
$
23
 
General and administrative expenses
 
$
90
   
$
45
   
$
63
   
$
17
 
   
$
319
   
$
74
   
$
195
   
$
40
 

 
F - 22
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 6: - STOCKHOLDERS' EQUITY (CONT.)
 
e.
Options, restricted stock and restricted stock units to employees,   directors and consultants (cont.):
 
3.
RS and RSUs to employees and directors:
 
The following table summarizes the activity related to unvested RS and RSUs granted to employees and directors under the Company’s 2005 and 2016 incentive option plans for the nine month period ended March 31, 2019 (Unaudited):
 
   
Number
 
Unvested at the beginning of period
   
6,293,608
 
Granted
   
4,976,000
 
Forfeited
   
(398,594
)
Vested
   
(1,817,770
)
Unvested at the end of the period
   
9,053,244
 
Expected to vest after March 31, 2019
   
8,752,241
 
 
Compensation expenses related to RS and RSUs granted to employees and directors were recorded as follows:
 
   
Nine months ended March 31,
   
Three months ended March 31,
 
   
2019
   
2018
   
2019
   
2018
 
   
(Unaudited)
   
(Unaudited)
 
Research and development expenses
 
$
920
   
$
835
   
$
480
   
$
504
 
General and administrative expenses
   
2,261
     
3,637
     
907
     
1,070
 
   
$
3,181
   
$
4,472
   
$
1,387
   
$
1,574
 
 
Unamortized compensation expenses related to RSUs granted to employees and directors to be recognized over an average time of approximately 4 years are approximately $5,473.
 
F - 23
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
 
NOTE 6: - STOCKHOLDERS' EQUITY (CONT.)
 
e.
Options, restricted stock and restricted stock units to employees,   directors and consultants (cont.):
 
4.
RS and RSUs to consultants:
 
The following table summarizes the activity related to unvested RS and RSUs granted to consultants under the Company’s 2005 and 2016 incentive option plans for the nine month period ended March 31, 2019 (Unaudited):
 
   
Number
 
Unvested at the beginning of period
   
199,559
 
Granted
   
411,760
 
Vested
   
(193,610
)
Unvested at the end of the period
   
417,709
 
 
Compensation expenses related to RS and RSUs granted to consultants were recorded as follows:
 
   
Nine months ended March 31,
   
Three months ended March 31,
 
   
2019
   
2018
   
2019
   
2018
 
   
(Unaudited)
   
(Unaudited)
 
Research and development expenses
 
$
55
   
$
21
   
$
37
   
$
18
 
General and administrative expenses
   
394
     
328
     
134
     
155
 
   
$
449
   
$
349
   
$
171
   
$
173
 

NOTE 7:-OTHER INCOME
 
In December 2017, the Subsidiary was awarded approximately $43 (NIS 150) by the Israeli Ministry of Labor, Social Affairs and Social Services related to its “Equal Employment” program which aims to reward and honor Israeli employers who demonstrate and promote gender equality in employment.
 
NOTE 8:-SUBSEQUENT EVENTS

On April 8, 2019, the Company sold, pursuant to an underwriting agreement relating to a firm commitment public offering (the “Public Offering”), an aggregate of 28,571,429 shares of common stock and warrants to purchase 28,571,429 shares of common stock, inclusive of the underwriter’s over-allotment option which was exercised in full, for aggregate gross proceeds of $20,000. The warrants issued in the Public Offering are exercisable for a period of five years from issuance and have an exercise price of $0.70 per share. In addition, on April 8, 2019, the Company sold, pursuant to a subscription agreement with a certain investor in a registered direct offering (the “Registered Direct Offering”), 1,428,571 shares of common stock, for aggregate gross proceeds of $1,000. The net proceeds from the Public Offering and the Registered Direct Offering, after deducting underwriting commissions and discounts and other expenses related to the offerings, were $19,467.
 
F - 24
 
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 other Federal securities laws, and is subject to the safe-harbor created by such Act and laws.  Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, 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,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable terminology.  These statements are merely predictions and therefore inherently subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance levels of activity, or our achievements, or industry 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 may appear elsewhere in this quarterly report on Form 10-Q and include, but are not limited to, statements regarding the following:

·
the expected development and potential benefits from our products in treating various medical conditions;
 
·
the clinical trials to be conducted according to our license agreement with CHA Biotech Co. Ltd.;
 
·
our plan to execute our strategy independently, using our own personnel, and through relationships with research and clinical institutions or in collaboration with other companies;
 
·
the prospects of entering into additional license agreements, or other forms of cooperation with other companies and medical institutions;
 
·
our pre-clinical and clinical trials plans, including timing of initiation, enrollment and conclusion of trials;
 
·
the expected timing of the release of data from our various studies;
 
·
achieving regulatory approvals, including under accelerated paths;
 
·
receipt of future funding from the Israel Innovation Authority, or IIA, the European Union's Horizon 2020 program as well as grants from other independent third parties;
 
·
our marketing plans, including timing of marketing our  product candidates, PLX-PAD and PLX-R18;
 
·
developing capabilities for new clinical indications of placenta expanded (PLX) cells and new products;
 
·
the timing and development of our PLX-Immune product candidate;
 
·
our estimations regarding the size of the global market for our product candidates;
 
·
our expectations regarding our production capacity;
 
·
our expectation to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity;
 
·
our expectations regarding our short- and long-term capital requirements;
 
3
·
the proposed joint venture to be established with Sosei Corporate Venture Capital Ltd. for the clinical development and commercialization of Pluristem’s PLX-PAD cell therapy product in Japan, the plan to enter into definitive agreements and the timing of entering such agreements;
 
·
our outlook for the coming months and future periods, including but not limited to our expectations regarding future revenue and expenses; and
 
·
information with respect to any other plans and strategies for our business.
 
Our business and operations are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.

In addition, historic results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions. Also, historic results referred to in this periodic report would be interpreted differently in light of additional research, clinical and preclinical trials results.   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, 2018, or the 2018 Annual Report.  Readers are also urged to carefully review and consider the various disclosures we have made in that report.

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

Overview
 
Pluristem Therapeutics Inc. is a leading developer of placenta-based cell therapy product candidates for the treatment of multiple ischemic, inflammatory and hematologic conditions. Our lead indications are critical limb ischemia, or CLI, muscle recovery following surgery for hip fracture, and acute radiation syndrome, or ARS.  Each of these indications is a severe unmet medical need. We were incorporated in Nevada in 2001, and have a wholly owned subsidiary in Israel called Pluristem Ltd. We operate in one segment and our operations are focused on the research, development, clinical trials and manufacturing of cell therapeutics and related technologies.

PLX cells are derived from a class of placental cells that are harvested from donated placenta at the time of full term healthy delivery of a baby. PLX cell products require no tissue matching prior to administration. They are produced using our proprietary three-dimensional expansion technology. Our manufacturing facility complies with the European, Japanese, Israeli, South Korean and U.S. Food and Drug Administration, or FDA’s, current Good Manufacturing Practice requirements and has been approved by the European and Israeli regulators for production of PLX-PAD for late stage trials. In December 2017, after an audit of our facilities, we were granted manufacturer/importer authorization and Good Manufacturing Practice Certification by Israel’s Ministry of Health. If we obtain FDA and other regulatory approvals to market PLX cells, we expect to have in-house production capacity to grow clinical-grade PLX cells in commercial quantities.

Our goal is to make significant progress with our clinical pipeline and our anticipated pivotal trials in order to ultimately bring innovative, potent therapies to patients who need new treatment options. We expect to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity. Our business model for commercialization and revenue generation includes, but is not limited to, direct sale of our products, partnerships, licensing deals, and joint ventures with pharmaceutical companies.

We aim to shorten the time to commercialization of our product candidates by leveraging unique accelerated regulatory pathways that exist in the United States, Europe and Japan to bring innovative products that address life-threatening diseases to the market efficiently.  We believe that these accelerated pathways create substantial opportunities for us and for the cell therapy industry as a whole.

4
Two pivotal, Phase III multinational clinical trials are currently being conducted with our PLX-PAD product candidate: one in CLI, and the other in muscle recovery following surgery for hip fracture.  In April 2019, we successfully enrolled over 50% of patients in our Phase III study in CLI, which allows for an interim analysis of efficacy after a one-year follow-up period under the European Medicines Agency’s, or EMA, Adaptive Pathways pilot project, in which PLX-PAD was selected to participate. Based on our current patient enrollment progress, we expect to complete the follow up of our Phase III study in CLI in the first half of 2020 with respect to Europe, and in the first half of 2021 with respect to the United States.   In addition, based on our current patient enrollment progress, we expect to complete the follow up of our Phase III study in muscle recovery following surgery for hip fracture in the second half of 2020. We expect to release the clinical data shortly after the conclusion of the follow ups.

Our PLX-PAD cell program in CLI had been selected for the Adaptive Pathways pilot project of the  EMA, Japan’s Pharmaceuticals and Medical Devices Agency, or PMDA accelerated pathway, the FDA Fast Track Designation and FDA Expanded Access Program, or EAP, in the United States. The CLI program in the European Union was awarded a Euro 7,600,000 (approximately $8,900,000) grant as part of the European Union’s Horizon 2020 program and to date we have received a portion of such grant.

Our PLX-PAD cell program in muscle recovery following surgery for hip fracture was also selected for the Adaptive Pathways pilot project of EMA and was awarded a Euro 7,400,000 (approximately $8,600,000) grant as part of the European Union’s Horizon 2020 program and to date we have received a portion of such grant.

Our second product candidate, PLX-R18, is under development in the United States for ARS via the FDA Animal Rule regulatory pathway, and, based on our assessment, is expected to advance to a pivotal trial, which may also result in approval without the prior performance of human efficacy trials. The National Institutes of Health’s National Institute of Allergy and Infectious Diseases has completed a dose selection trial with our PLX-R18 product candidate in the hematologic component of ARS. Assuming we receive a contract from the U.S. government, we expect to initiate an ARS pivotal trial in the second half of 2019.

PLX-R18 is under development in the United States and Israel for the treatment of incomplete hematopoietic recovery following hematopoietic cell transplantation (“HCT”). In March 2019, we announced that we had fully enrolled the second cohort of six patients in our ongoing Phase I clinical study in HCT, and received data and safety monitoring board approval to continue to the final cohort of the study.
 
In July 2018, we entered into a strategic collaboration agreement with Thermo Fisher Scientific Inc. with the aim of advancing the fundamental knowledge of cell therapy industrialization and to improve quality control of the end-to-end supply chain. The collaboration will combine Thermo Fisher’s experience in cell therapy development and bio production scale up with our expertise in cell therapy manufacturing, clinical development and quality control.

In September 2018, we announced that the FDA granted Orphan Drug Designation to our PLX cell therapy for the treatment of graft failure and incomplete hematopoietic recovery following hematopoietic cell transplantation.

In October 2018, we announced that the FDA approved cost recovery for our PLX-PAD under an EAP held by World Trials , Inc., a privately-held third-party sponsor. In April 2019, we announced the initiation of our FDA approved EAP, with several site initiations in the U.S. Under the terms of the EAP, an initial 100 Rutherford-5 CLI patients who are ineligible for inclusion under our ongoing Phase 3 study protocol, and whose condition is life-threatening, can be enrolled.

In November 2018, we entered into a license agreement with a subsidiary of Chart Industries, Inc., or Chart, regarding our thawing device for cell-based therapies. Pursuant to the terms of the agreement, Chart obtained the exclusive rights to manufacture and market the thawing device in all territories worldwide, excluding Greater China, and we are to receive royalties from sales of the product and supply of an agreed upon number of thawing devices. Royalties shall commence on the date of Chart’s first commercial sale of the thawing device.

In January 2019, we announced a successful one-year follow up of a compassionate use treatment in a Buerger’s disease patient treated with our PLX-PAD cell therapy.

5
In January 2019, we announced the receipt of a joint grant awarded by the Israeli Ministry of Defense and the IIA for the pre-clinical development of our PLX cells for the treatment of burn injuries. We are currently in discussions with the Israeli Ministry of Defense to define the structure of the collaboration.

In February 2019, we announced that the large-scale research initiative, RESTORE, of which we are a member, was nominated to be one of two finalists competing to be awarded up to €1 billion over the next 10 years by the European Commission for the development and advancement of transformative therapeutics.

In February 2019, we entered into a collaboration with NASA’s Ames Research Center to evaluate the potential of our PLX cell therapies in preventing and treating medical conditions caused during space missions.
 
In May 2019, we filed a U.S. provisional patent application titled “Methods and Compositions for Producing Cannabinoids,” which covers the use of our state-of-the-art, proprietary 3-D cell culturing technology for the potential manufacturing of cannabinoid-producing cells.

6
 
RESULTS OF OPERATIONS – NINE AND THREE MONTHS ENDED MARCH 31, 2019 COMPARED TO NINE AND THREE MONTHS ENDED MARCH 31, 2018.

Revenues
 
Revenues for the nine month period ended March 31, 2019 were $53,500 as compared to $50,000 in the nine month period ended March 31, 2018. We did not receive any revenues for the three month period ended March 31, 2019. All revenues in the nine month periods ended March 31, 2019 and 2018 were related to the sale of our PLX cells for research use.

Research and Development Expenses, Net
 
Research and development expense, net (costs less participation and grants by the IIA and other parties) for the nine month period ended March 31, 2019 increased by 25% from $16,697,000 for the nine month period ended March 31, 2018 to $20,847,000. The increase is mainly attributed to:   (1)   an increase in subcontractor expenses related to some of our clinical studies, (2) an increase in materials consumption, (3) a decrease in IIA participation (approximately $900,000 was approved in calendar year 2018 compared to approximately $500,000 that was approved in calendar year 2019), and (4) an increase in stock-based compensation expenses due to the amount of restricted stock units and options granted. The increase was partially offset by a higher participation by the European Union with respect to the Horizon 2020 grants.
 
Research and development expense, net (costs less participation and grants by the IIA and other parties) for the three months ended March 31, 2019 increased by 23% from $6,382,000 for the three months ended March 31, 2018 to $7,827,000. The increase is mainly attributed to: (1) an increase in materials consumption, (2) a decrease in IIA participation (approximately $900,000 was approved in calendar year 2018 compared to approximately $500,000 that was approved in calendar year 2019), and (3) a lower participation by the European Union with respect to the Horizon 2020 grants. The increase was partially offset by   a decrease in payroll expenses related to a decrease in the average number of employees.
 
General and Administrative Expenses
 
General and administrative expenses for the nine month period ended March 31, 2019 decreased by 18% from $8,349,000 for the nine month period ended March 31, 2018 to $6,806,000. This decrease is attributed to a decrease in stock-based compensation expenses related to the amount of restricted stock units granted and their vesting schedules, and a decrease in corporate activities expenses.
 
General and administrative expenses for the three months ended March 31, 2019 decreased by 7% from $2,666,000 for the three months ended March 31, 2018 to $2,473,000. This decrease is attributed to a decrease in stock-based compensation expenses related to the amount of restricted stock units granted and their vesting schedules. The decrease was partially offset by an increase in corporate activities expenses.
 
Financial Income, Net
 
Financial income, net, decreased from a net financial income of $7,810,000 for the nine month period ended March 31, 2018 to a net financial income of $54,000 for the nine month period ended March 31, 2019. This decrease is mainly   due to the sale of our investments in marketable securities which occurred in the nine months ended March 31, 2018.
 
Financial income, net, decreased from a net financial income of $7,517,000 for the three months ended March 31, 2018 to a net financial income of $222,000 for the three months ended March 31, 2019. This decrease is mainly   due to the sale of our investments in marketable securities which occurred in the three months ended March 31, 2018. The decrease was partially offset by changes in the fair value of our hedging instruments related to the strength of the U.S. dollar against the NIS.
 
Net Loss
 
Net loss for the nine and three month periods ended March 31, 2019 was $27,547,000 and $10,078,000, respectively, as compared to net loss of $17,145,000 and $1,531,000 for the nine and three month periods ended March 31, 2018, respectively. The changes were mainly due to a decrease in financial income and an increase in research and development expenses, as described above. Net loss per share for the nine and three month periods ended March 31, 2019 was $0.24 and $0.09, respectively, as compared to $0.16 and $0.01 for the nine and three month periods ended March 31, 2018.
 
7
For the nine and three month periods ended March 31, 2019 and March 31, 2018, we had weighted average shares of common stock outstanding of 115,542,598, 117,225,522 and 104,107,748, 110,044,458, respectively, which were used in the computations of net loss per share for the nine and three month periods.
 
The increase in weighted average common shares outstanding reflects the issuance of additional shares mainly related to the issuances of shares to employees and consultants, issuances of shares pursuant to our At Market Issuance Sales Agreement, or the ATM Agreement, and our Open Market Sale Agreement SM , or the Sale Agreement, and shares issued as a result of exercises of options.
 
Liquidity and Capital Resources

As of March 31, 2019, our total current assets were $13,196,000 and total current liabilities were $8,247,000. On March 31, 2019, we had a working capital surplus of $4 , 949,000, stockholders' equity of $8,627,000 and an accumulated deficit of $243,244,000. We finance our operations, and plan to continue doing so, from our existing cash, issuances of our securities and funds from grants from the IIA, European Union’s Horizon 2020 program, Israel’s Ministry of Economy, and other non-dilutive sources.

Our cash and cash equivalents as of March 31, 2019 amounted to $9 , 535,000 compared to $5 , 940,000 as of March 31, 2018, and compared to $8,821,000 as of June 30, 2018. Cash balances changed in the nine months ended March 31, 2019 and 2018 for the reasons presented below.

Operating activities used cash of $22,780,000 in the nine months ended March 31, 2019, compared to $15,594,000 in the nine months ended March 31, 2018. Cash used in operating activities in the nine months ended March 31, 2019 and 2018 consisted primarily of payments of salaries to our employees and payments of fees to our consultants, suppliers, subcontractors, and professional services providers, including the costs of clinical studies, offset by grants from the IIA, Horizon 2020, Israel’s Ministry of Economy and other research grants.

Investing activities provided cash of $19,685,000 in the nine months ended March 31, 2019, compared to cash provided of $204,000   for the nine months ended March 31, 2018. The investing activities in the nine month period ended March 31, 2019 consisted primarily of the withdrawal of $19,908,000 of short term deposits, offset by   payments of $217,000 related to investment in property and equipment and investment in long-term bank deposits of $6,000.   The   investing activities in the nine months ended March 31, 2018 consisted primarily of $20,321,000 related to investment in short term deposits, investment of $1,146,000 in marketable securities and payments of $219,000 related to investment in property and equipment, offset by cash provided from the sale and redemption of marketable securities of $21,890,000.

Financing activities generated cash of $3,825,000 during the nine months ended March 31, 2019, compared to $17,314,000 for the nine months ended March 31, 2018. The cash generated in the nine months ended March 31, 2019 from financing activities is related to net proceeds of $3,710,000 from issuing shares of our common stock under our ATM Agreement and the Sale Agreement, proceeds of $107,000 related to a grant received from the Israel-United States Binational Industrial Research and Development Foundation and net proceeds of $8,000 from the exercise of options. The cash generated in the nine months ended March 31, 2018 from financing activities is related to net proceeds of $13,646,000 from issuing shares of our common stock in a public offering we conducted in October 2017, net proceeds of $2,412,000 from issuing shares of our common stock under our ATM Agreement, net proceeds of $1,168,000 from issuing shares of our common stock from the exercise of warrants and options and proceeds of $88,000 related to a grant received from the Israel-United States Binational Industrial Research and Development Foundation.

In July 2017, we entered into the ATM Agreement with FBR Capital Markets & Co., MLV & Co. LLC and Oppenheimer & Co. Inc., each an Agent, which provides that, upon the terms and subject to the conditions and limitations set forth in the ATM Agreement, we could elect, from time to time, to issue and sell shares of common stock having an aggregate offering price of up to $80,000,000 through any of the Agents. We were not obligated to make any sales of common stock under the ATM Agreement. From July 2017 through February 4, 2019, we sold an aggregate of 5,305,408 shares of common stock pursuant to the ATM Agreement at an average price of $1.37 per share. On February 4, 2019, we notified the Agents of the termination of the ATM Agreement.

8
On February 6, 2019, we entered into the Sale Agreement, with Jefferies LLC, as agent, or Jefferies, pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $50,000,000 from time to time through Jefferies. We are not obligated to make any sales of common stock under the Sale Agreement. From February 6, 2019 through March 31, 2019, we sold an aggregate of 2,018,000 shares of common stock pursuant to the Sale Agreement at an average price of $0.97 per share.

During the nine months ended March 31, 2019, we received cash of approximately $292,000 from the IIA towards our research and development expenses. According to the IIA grant terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology developed using this and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid. In the absence of such sales, no payment is required. Through March 31, 2019, total grants obtained from the IIA aggregated to approximately $27,096,000 and total royalties paid and accrued amounted to $170,000.

The IIA has supported our activity in the past fourteen years. Our previous program, for the thirteen year, was approved by the IIA in 2018 and relates to a grant of approximately $900,000. The grant was used to cover research and development expenses for the period of January 1, 2018 to December 31, 2018.   Our most recent program, for the fourteenth year, was approved by the IIA in 2019 and relates to a grant of approximately $500,000. The grant will be used to cover research and development expenses for the period of January 1, 2019 to December 31, 2019.

As of March 31, 2019, we received total grants of approximately $4,604,000 in cash from the European Union research and development consortiums pursuant to the Horizon 2020 program.

The currency of our financial portfolio is mainly in U.S. dollars and we use options contracts in order to hedge our exposures to currencies other than the U.S. dollar. For more information, please see Item 7A. - “Quantitative and Qualitative Disclosures about Market Risk” in the 2018 Annual Report on form 10-K for the fiscal year ended June 30, 2018.
 
We have an effective Form S-3 registration statement, filed under the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or the SEC, using a “shelf” registration process. Under this shelf registration process, we may, from time to time, sell common stock, preferred stock and warrants to purchase common stock, and units of two or more of such securities in one or more offerings up to a total dollar amount of $200,000,000. As of May 6, 2019, we have sold 39,000,000 shares of our common stock and warrants to purchase up to 28,571,429 shares of common stock in a total gross amount of $36,051,000 in offerings we closed in October 2017 and April 2019, 5,305,408 shares of common stock in a total gross amount of   $7,258,542 pursuant to the ATM Agreement, 2,018,000 shares of common stock in a total gross amount of $1,967,060 pursuant to the Sale Agreement, and may be deemed to have sold an additional $48,032,940 pursuant to the Sale Agreement.
 
  On April 8, 2019, we sold, pursuant to an underwriting agreement relating to a firm commitment public offering, or the Public Offering, an aggregate of 28,571,429 shares of common stock and warrants to purchase 28,571,429 shares of common stock, inclusive of the underwriter’s over-allotment option which was exercised in full, for aggregate gross proceeds of $20,000,000. The warrants issued in the Public Offering are exercisable for a period of five years from issuance and have an exercise price of $0.70 per share. In addition, on April 8, 2019, we sold, pursuant to a subscription agreement with a certain investor in a registered direct offering, or the Registered Direct Offering, 1,428,571 shares of common stock, for aggregate gross proceeds of $1,000,000. The net proceeds from the Public offering and the Registered Direct Offering, after deducting underwriting commissions and discounts, and other offering expenses, were $19,467,000.

Outlook

We have accumulated a deficit of $243,244,000 since our inception in May 2001. We do not expect to generate any significant revenues from sales of products in the next twelve months. Our cash needs will increase in the foreseeable future. We expect to generate revenues, which in the short and medium terms will unlikely exceed our costs of operations, from the sale of licenses to use our technology or products.

We will be required to obtain additional liquidity resources in order to support the commercialization of our products and maintain our research and development and clinical trials activities.

9
We are continually looking for sources of funding, including non-diluting sources such as the IIA grants, the European Union grant and other research grants,   collaboration with other companies and sales of our common stock.

As of March 31, 2019, our cash position (cash and cash equivalents and short-term bank deposits) totaled approximately $10,537,000. On April 8, 2019, we closed the Public Offering and Registered Direct Offering, for aggregate net proceeds of $19,467,000. We are addressing our liquidity issues by implementing initiatives to allow the continuation of our activities. Our current operating plan includes various assumptions concerning the level and timing of cash outflows for operating activities and capital expenditures. Our ability to successfully carry out our business plan, which includes a cost-reduction plan should we be unable to raise sufficient additional capital, is primarily dependent upon our ability to (1) obtain sufficient additional capital, (2) enter into license agreements to use or commercialize our products and (3) receive other sources of funding, including non-diluting sources such as the IIA grants, the Horizon 2020 grant and other grants. There are no assurances, however, that we will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of our products.

According to management’s estimates, liquidity resources as of March 31, 2019,   together with the funds received from the Public Offering and Registered Direct Offering we closed on April 8, 2019, will be sufficient to maintain our operations into the beginning of the fourth quarter of fiscal year 2020. Our inability to raise funds to carry out our business plan will have a severe negative impact on our ability to remain a viable company.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.
 
Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures - We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers, or Co-CEOs, and our Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Co-CEOs and our CFO, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on that evaluation, our Co-CEOs and CFO concluded that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting - There has been no change in our internal control over financial reporting during the third quarter of fiscal year 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
10
 
PART II - OTHER INFORMATION
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three months ended March 31, 2019, we issued an aggregate of 22,388 shares of common stock to a consultant for services rendered. We issued these shares pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, or the Securities Act.

Item 5. Other Information.

Employment Agreement with Chen Yehuda-Franco

On May 6, 2019, we entered into an employment agreement with Ms. Franco-Yehuda, our CFO, Secretary and Treasurer, which supersedes the existing employment agreement with Ms. Franco-Yehuda. Pursuant to the agreement, we have agreed to pay Ms. Franco-Yehuda a monthly salary of 36,000 NIS. Pursuant to the agreement, we have also agreed to provide Ms. Franco-Yehuda with a company car, or a fixed amount of NIS 4,000, cellular phone reimbursement and reimbursement for certain other expenses.  The agreement may be terminated by us or Ms. Franco-Yehuda with sixty days’ prior notice. Ms. Franco-Yehuda will also be subject to standard confidentiality, intellectual property assignment and non-compete provisions.

In addition, Ms. Franco-Yehuda will be entitled to receive equity awards as awarded by our Board of Directors and/or Compensation Committee at their sole discretion. Any awards issued to Ms. Franco-Yehuda will be entitled to acceleration, in the event of a change of control transaction (as defined in the agreement), of 100% of any unvested awards.
 
Item 6. Exhibits.
   
4.1* Warrant Agreement by and between Pluristem Therapeutics Inc. and American Stock Transfer & Trust Company, LLC (including the form of Warrant certificate).
   
10.1* Underwriting Agreement, dated April 4, 2019, between Pluristem Therapeutics Inc. and Ladenburg Thalmann & Co. Inc., as representative of the underwriters named therein.
   
10.2* Subscription Agreement, dated April 4, 2019, between Pluristem Therapeutics Inc. and ARK Genomic Revolution ETF.
   
10.3* Employment Agreement between Pluristem Ltd. and Chen Franco-Yehuda dated May 6, 2019.
   
   


   
   
   
101 *
The following materials from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Interim Condensed Consolidated Balance Sheets, (ii) the Interim Condensed Consolidated Statements of Operations, (iii) the Interim Condensed Consolidated Statements of Comprehensive Loss, (iv) the Interim Condensed Statements of Changes in Equity, (v) the Interim Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Interim Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.
 
*      Filed herewith.
**   Furnished herewith.

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SIGNATURES
 
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
PLURISTEM THERAPEUTICS INC.

By: /s/ Zami Aberman
Zami Aberman, Co-Chief Executive Officer
(Principal Executive Officer)
Date:  May 6, 2019
 
By: /s/ Yaky Yanay
Yaky Yanay, Co-Chief Executive Officer and President
(Principal Executive Officer)
Date:  May 6, 2019
 
By: /s/ Chen Franco-Yehuda
Chen Franco-Yehuda, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Date:  May 6, 2019
 
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