----

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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| PLURISTEM THERAPEUTICS INC.                      |
|--------------------------------------------------|
| (Name of registrant as specified in its charter) |

| Nevada                                                         |   | 98-0351734                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |

| MATAM Advanced Technology Park,Building No. 20, Haifa, Israel |   |  31905 |
|---------------------------------------------------------------|--------|-------------|
| (Address of principal executive offices)                      |   | (Zip Code)  |

| Title of each classCommon Stock, par value $0.00001 |   | Name of each exchange on which registeredNasdaq Capital Market |
|-----------------------------------------------------|--------|----------------------------------------------------------------|

| None.            |
|------------------|
| (Title of class) |

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| Large accelerated filer o   | Accelerated filer o | Non-accelerated filer o                       |
|-----------------------------|---------------------|-----------------------------------------------|
| Smaller reporting company x |                | (do not check if a smaller reporting company) |

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| TABLE OF CONTENTS PART I | 5                                                                                                                  |
|-------------------------------|--------------------------------------------------------------------------------------------------------------------|
| Item 1.                       | Business                                                                                                           | 5 |
| Item 1A.                 | Risk Factors                                                                                                       | 10 |
| Item 1B.                 | Unresolved Staff Comments                                                                                          | 19 |
| Item 2.                       | Properties                                                                                                         | 19 |
| Item 3.                       | Legal Proceedings                                                                                                  | 19 |
| Item 4.                       | [Removed and Reserved]                                                                                             | 19 |
| PART II                       |                                                                                                               | 20 |
| Item 5.                       | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 20 |
| Item 6.                       | Selected Financial Data                                                                                            | 20 |
| Item 7.                       | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 20 |
| Item 7A.                 | Quantitative and Qualitative Disclosures About Market Risk                                                         | 24 |
| Item 8.                       | Financial Statements and Supplementary Data                                                                        | 25 |
| Item 9.                       | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                               | 26 |
| Item 9A.                 | Controls and Procedures                                                                                            | 26 |
| Item 9B.                 | Other Information.                                                                                                 | 27 |
| PART III                      |                                                                                                               | 27 |
| Item 10.                      | Directors, Executive Officers and Corporate Governance                                                             | 27 |
| Item 11.                      | Executive Compensation                                                                                             | 31 |
| Item 12.                      | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                     | 35 |
| Item 13.                      | Certain Relationships and Related Transactions, and Director Independence                                          | 38 |
| Item 14.                      | Principal Accounting Fees and Services                                                                             | 38 |
| PART IV                       |                                                                                                               | 39 |
| Item 15.                      | Exhibits                                                                                                           | 39 |

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----

PART I

Item 1. Business.

----

| · | PLX-PAD |
|--------|---------|

----

| · | Other product candidates |
|--------|--------------------------|

| Product    |   | For the treatment of              |   | Status           |
|------------|--------|-----------------------------------|--------|------------------|
| PLX-ORTHO  |   | Orthopedic indications            |   | Pre-clinical     |
| PLX-NEURO  |   | Neuropathic and inflammatory pain |   | Pre-clinical     |
| PLX-IBD    |   | Inflammatory bowel disease        |   | Pre- Clinical    |
| PLX-STROKE |   | Ischemic stroke                   |   | Pre- Clinical    |
| PLX-BMT    |   | Bone marrow transplantation       |   | Pre- Clinical    |
| PLX-MS     |   | Multiple sclerosis                |   | Proof of concept |

----

| · | Pre-clinical laboratory and animal tests conducted in compliance with the Good Laboratory Practice, or GLP, requirements to assess a drug's biological activity and to identify potential safety problems, and to characterize and document the product's chemistry, manufacturing controls, formulation, and stability. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Submission to the FDA of an Investigational New Drug, or IND application, which must become effective before clinical testing in humans can begin; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Obtaining approval of Institutional Review Boards, or IRBs, of research institutions or other clinical sites to introduce the biologic drug candidate into humans in clinical trials; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Conducting adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for its intended indication conducted in compliance with Good Clinical Practice, or GCP, requirements; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Compliance with current Good Manufacturing Practices, or cGMP regulations and standards; |
|--------|------------------------------------------------------------------------------------------|

| · | Submission to the FDA of a Biologics License Application, or BLA, for marketing that includes adequate results of pre-clinical testing and clinical trials; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | FDA reviews the marketing application in order to determine, among other things, whether the product is safe, effective and potent for its intended uses; and |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Obtaining FDA approval of the BLA, including inspection and approval of the product manufacturing facility as compliant with cGMP requirements, prior to any commercial sale or shipment of the pharmaceutical agent. The FDA may also require post-marketing testing and surveillance of approved products, or place other conditions on the approvals. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | Compliance with current Good Manufacturing Practices, or cGMP regulations and standards,  pre-clinical laboratory and animal testing; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Filing a Clinical Trial Application (CTA) with the various member states or a centralized procedure; Voluntary Harmonisation Procedure (VHP), a procedure which makes it possible to obtain a coordinated assessment of an application for a clinical trial that is to take place in several European countries. Obtaining approval of Ethic Committees of research institutions or other clinical sites to introduce the biologic drug candidate into humans in clinical trials; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Adequate and well-controlled clinical trials to establish the safety and efficacy of the product for its intended use; and |
|--------|----------------------------------------------------------------------------------------------------------------------------|

| · | Submission to EMA for a Marketing Authorization (MA); Review and approval of the MAA (Marketing Authorization Application). |
|--------|-----------------------------------------------------------------------------------------------------------------------------|

----

Item 1A. Risk Factors.

----

----

|   | · | the FDA or the EMA does not grant permission to proceed and places the trial on clinical hold; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | subjects do not enroll in our trials at the rate we expect; |
|--------|--------|-------------------------------------------------------------|

|   | · | subjects experience an unacceptable rate or severity of adverse side effects; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | third-party clinical investigators do not perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, Good Clinical Practice and regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | inspections of clinical trial sites by the FDA, EMA, or Institutional Review Boards (IRBs) of research institutions participating in our clinical trials find regulatory violations that require us to undertake corrective action, suspend or terminate one or more sites, or prohibit us from using some or all of the data in support of our marketing applications; or |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | one or more IRBs suspends or terminates the trial at an investigational site, precludes enrollment of additional subjects, or withdraws its approval of the trial. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | continued scientific progress in our research and development programs; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | costs and timing of conducting clinical trials and seeking regulatory approvals and patent prosecutions; |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | competing technological and market developments; |
|--------|--------|--------------------------------------------------|

----

|   | · | our ability to establish additional collaborative relationships; and |
|--------|--------|----------------------------------------------------------------------|

|   | · | the effect of commercialization activities and facility expansions if and as required. |
|--------|--------|----------------------------------------------------------------------------------------|

----

----

----

----

----

----

|   | l | The agreement did not contain any provisions for the adjustment of the specified minimum price in the event of stock splits and the like. If such agreement were to have contained such a provision, the floor price would be $2.50, which is more than the offering price of this offering. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | l | The majority of purchasers in the private placement have sold the stock purchased in the placement, and thus the number of purchasers whose consent is purportedly required has been substantially reduced. The number of shares outstanding as to which this provision currently applies according the information supplied by our transfer agent is 2,021,545 shares. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | l | An agreement that prevents our Board of Directors from issuing shares that are necessary to finance our business may be unenforceable. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------|

|   | l | Even if the agreement were considered enforceable and the share price number were to be adjusted for our reverse stock split, we believe that there would be no damage from this offering to the holders of our shares whose consent is purportedly required. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 1B.  Unresolved Staff Comments.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. [Removed and Reserved]

----

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

| Quarter Ended      |   | High |   |   | Low    |   |
|--------------------|--------|------|--------|--------|--------|--------|
| September 30, 2008 |   | $    | 0.89   |   |   | $      | 0.82 |   |
| December 31, 2008  |   | $    | 0.44   |   |   | $      | 0.38 |   |
| March 31, 2009     |   | $    | 1.39   |   |   | $      | 1.28 |   |
| June 30, 2009      |   | $    | 1.41   |   |   | $      | 1.29 |   |
| September 30, 2009 |   | $    | 1.42   |   |   | $      | 1.38 |   |
| December 31, 2009  |   | $    | 1.21   |   |   | $      | 1.00 |   |
| March 31, 2010     |   | $    | 1.15   |   |   | $      | 1.10 |   |
| June 30, 2010      |   | $    | 1.16   |   |   | $      | 1.11 |   |

Item 6. Selected financial data.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

----

----

----

----

|   | · | internal costs associated with research and development activities; |
|--------|--------|---------------------------------------------------------------------|

|   | · | payments made to consultants and subcontractors such as research organizations; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | manufacturing development costs; |
|--------|--------|----------------------------------|

|   | · | personnel-related expenses, including salaries, benefits, travel, and related costs for the personnel involved in research and development; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | activities relating to the preclinical studies and clinical trials; and |
|--------|--------|-------------------------------------------------------------------------|

|   | · | facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, as well as laboratory and other supplies. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

----

Item 8. Financial Statements and Supplementary Data.

----

----

|                                                             | Page       |
|------------------------------------------------------------------|------------|
|                                                             |       |
| Report of Independent Registered Public Accounting Firm          | F-2        |
|                                                             |       |
| Consolidated Balance Sheets                                      | F-3- F-4   |
|                                                             |       |
| Consolidated Statements of Operations                            | F-5        |
|                                                             |       |
| Statements of changes in Stockholders’ Equity (Deficiency) | F-6- F-15  |
|                                                             |       |
| Consolidated Statements of Cash Flows                            | F-16- F-18 |
|                                                             |       |
| Notes to Consolidated Financial Statements                       | F-19- F-48 |

----

|   | Kost Forer Gabbay & Kasierer2 Pal-Yam Ave.Haifa 33095, Israel Tel:  972 (4)8654000Fax:  972 (3)5633443www.ey.com.il |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

PUBLIC ACCOUNTING 

|   |  /s/ Kost Forer Gabbay & KasiererA member of Ernst & Young Global |
|--------|--------------------------------------------------------------------------------|

----

|                        |
|-----------------------------|
| CONSOLIDATED BALANCE SHEETS |
| U.S. Dollars in thousands   |

|                                                       |   |   |   |   | June 30, |   |
|------------------------------------------------------------|--------|--------|--------|--------|----------|--------|
|                                                       |   | Note   |   |   | 2010     |   |   | 2009 |   |
| ASSETS                                                     |   |   |   |   |     |   |   |   |   |
|                                                       |   |   |   |   |     |   |   |   |   |
| CURRENT ASSETS:                                            |   |   |   |   |     |   |   |   |   |
|                                                       |   |   |   |   |     |   |   |   |   |
| Cash and cash equivalents                                  |   |   | 3      |   |     | $      | 1,583 |   |   | $ | 2,339 |   |
| Short term bank deposit                                    |   |   |   |   |     |   | 913 |   |   |   | - |   |
| Prepaid expenses                                           |   |   |   |   |     |   | 41 |   |   |   | 100 |   |
| Accounts receivable from the Office of the Chief Scientist |   |   |   |   |     |   | 706 |   |   |   | 383 |   |
| Other accounts receivable                                  |   |   |   |   |     |   | 362 |   |   |   | 113 |   |
| Total current assets                                       |   |   |   |   |     |   | 3,605 |   |   |   | 2,935 |   |
|                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| LONG-TERM ASSETS:                                          |   |   |   |   |     |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| Long-term deposits and restricted deposits                 |   |   |   |   |     |   | 168 |   |   |   | 171 |   |
| Severance pay fund                                         |   |   |   |   |     |   | 294 |   |   |   | 154 |   |
| Property and equipment, net                                |   |   | 4      |   |     |   | 1,555 |   |   |   | 1,203 |   |
| Total long-term assets                                     |   |   |   |   |     |   | 2,017 |   |   |   | 1,528 |   |
|                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| Totalassets                                                |   |   |   |   |     | $      | 5,622 |   |   | $ | 4,463 |   |

----

|                                                        |
|-------------------------------------------------------------|
| CONSOLIDATED BALANCE SHEETS                                 |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                       |   |   |   |   | June 30, |   |
|------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|----------|--------|
|                                                                                                       |   | Note   |   |   | 2010     |   |   | 2009 |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                 |   |   |   |   |     |   |   |   |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |
| CURRENT LIABILITIES                                                                                        |   |   |   |   |     |   |   |   |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |
| Trade payables                                                                                             |   |   |   |   | $        | 791    |   |   | $ | 487 |   |
| Accrued expenses                                                                                           |   |   |   |   |     | 118    |   |   |   | 81 |   |
| Other accounts payable                                                                                     |   |   | 5      |   |     |   | 372 |   |   |   | 272 |   |
| Total current liabilities                                                                                  |   |   |   |   |     |   | 1,281 |   |   |   | 840 |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| LONG-TERM LIABILITIES                                                                                      |   |   |   |   |     |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| Long-term obligation                                                                                       |   |   |   |   |     |   | - |   |   |   | 23 |   |
| Accrued severance pay                                                                                      |   |   |   |   |     |   | 360 |   |   |   | 206 |   |
|                                                                                                       |   |   |   |   |     |   | 360 |   |   |   | 229 |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                              |   |   | 6      |   |     |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                 |   |   | 7      |   |     |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
| Share capital:                                                                                             |   |   |   |   |     |   |   |   |   |   |   |   |
|  Common stock  $0.00001par value:                                                           |   |   |   |   |     |   |   |   |   |   |   |   |
|  Authorized: 100,000,000 shares as of June 30, 2010, 30,000,000 shares as of June 30, 2009.           |   |   |   |   |     |   |   |   |   |   |   |   |
|  Issued:  21,458,707 shares as of June 30, 2010, 14,738,693 shares as of June 30, 2009.     |   |   |   |   |     |   |   |   |   |   |   |   |
|  Outstanding:  20,888,781shares as of June 30, 2010, 13,676,886 shares as of June 30, 2009. |   |   |   |   |     |   | -(*) |   |   |   | -(*) |   |
| Additional paid-in capital                                                                                 |   |   |   |   |     |   | 44,086 |   |   |   | 36,046 |   |
| Accumulated deficit during the development stage                                                           |   |   |   |   |     |   | (40,105 | ) |   |   | (32,652 | ) |
|                                                                                                       |   |   |   |   |     |   | 3,981 |   |   |   | 3,394 |   |
|                                                                                                       |   |   |   |   |     |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |     | $      | 5,622 |   |   | $ | 4,463 |   |

| (*) | Less than $1. |
|-----|---------------|

----

|                                                        |
|-------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF OPERATIONS                       |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                  |   |   |   |   |   Year ended June 30, |   |              | Period from May 11, 2001 (Inception) throughJune 30, |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|---------------------------------|--------|-------------------|------------------------------------------------------|--------|
|                                                                                                                  |   | Note   |   |   | 2010                            |   |              | 2009                                                 |   |   | 2008 |   |   | 2010 |   |
|                                                                                                                  |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |
| Research and development expenses                                                                                     |   |   |   |   | $                               | 6,123  |              |                                                 | $      | 4,792 |   |   | $ | 5,077 |   |   | $ | 23,280 |   |
| Less participation by the Office of the Chief Scientist                                                               |   |   |   |   |                            | (1,822 | )                 |                                                 |   | (1,651 | ) |   |   | (684 | ) |   |   | (5,072 | ) |
| Research and development expenses, net                                                                                |   |   |   |   |                            | 4,301  |              |                                                 |   | 3,141 |   |   |   | 4,393 |   |   |   | 18,208 |   |
| General and administrative expenses                                                                                   |   |   |   |   |                            | 3,138  |              |                                                 |   | 3,417 |   |   |   | 6,036 |   |   |   | 20,511 |   |
| Know how write-off                                                                                                    |   |   |   |   |                            | -      |              |                                                 |   | - |   |   |   | - |   |   |   | 2,474 |   |
|                                                                                                                  |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Operating loss                                                                                                        |   |   |   |   |                            | (7,439 | )                 |                                                 |   | (6,558 | ) |   |   | (10,429 | ) |   |   | (41,193 | ) |
|                                                                                                                  |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Financial expenses (income), net                                                                                      |   |   | 8      |   |                            |   | 14                |                                                 |   |   | 78 |   |   |   | 69 |   |   |   | (1,088 | ) |
|                                                                                                                  |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the period                                                                                               |   |   |   |   |                            | $      | (7,453            | )                                                    |   | $ | (6,636 | ) |   | $ | (10,498 | ) |   | $ | (40,105 | ) |
|                                                                                                                  |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss per share:                                                                                                       |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net loss per share                                                                                  |   |   |   |   |                            | $      | (0.44             | )                                                    |   | $ | (0.63 | ) |   | $ | (1.63 | ) |   |   |   |   |
|                                                                                                                  |   |   |   |   |                            |   |              |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares used  in computing    basic and diluted net loss per share |   |   |   |   |                            |   |   17,004,998 |                                                 |   |   |     10,602,880 |   |   |   |     6,422,364 |   |   |   |   |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                              |   | Common Stock |     |   | Additional Paid-in |   |    | Receipts on Account of Common |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ Equity |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------|--------------------|--------|---------|-------------------------------|--------|--------|--------------------------------------------|--------|--------|---------------------------------------|--------|
|                                                                                                              |   | Shares       |     |   | Amount             |   |    | Capital                       |   |   | Stock                                      |   |   | Stage                                 |   |   | (Deficiency) |   |
| Issuance of common stock on July 9, 2001                                                                          |   |         | 175,500  |   |               | $      | (*)     |                          |   | $      | 3                                          |   |   | $                                     | -      |   |   | $ | - |   |   | $ | 3 |   |
| Balance as of June 30, 2001                                                                                       |   |         | 175,500  |   |               |   | (*)     |                          |   |   | 3                                          |   |   |                                  | -      |   |   |   | - |   |   |   | 3 |   |
| Net loss                                                                                                          |   |         | -        |   |               |   | -       |                          |   |   | -                                          |   |   |                                  | -      |   |   |   | (78 | ) |   |   | (78 | ) |
| Balance as of June 30, 2002                                                                                       |   |         | 175,500  |   |               |   | (*)     |                          |   |   | 3                                          |   |   |                                  | -      |   |   |   | (78 | ) |   |   | (75 | ) |
| Issuance of common stock on October 14, 2002,      net of  issuance expenses of $17 |   |         | 70,665   |   |               |   | (*)     |                          |   |   | 83                                         |   |   |                                  | -      |   |   |   | - |   |   |   | 83 |   |
| Forgiveness of debt                                                                                               |   |         | -        |   |               |   | -       |                          |   |   | 12                                         |   |   |                                  | -      |   |   |   | - |   |   |   | 12 |   |
| Stock cancelled on March 19, 2003                                                                                 |   |         | (136,500 | )      |               |   | (*)     |                          |   |   | (*)                                        |   |   |                                  | -      |   |   |   | - |   |   |   | - |   |
| Receipts on account of stock and warrants, net of      finders and legal fees of $56     |   |         | -        |   |               |   |  - |                          |   |   | -                                          |   |   |                                  | 933    |   |   |   | - |   |   |   | 933 |   |
| Net loss                                                                                                          |   |         | -        |   |               |   | -       |                          |   |   | -                                          |   |   |                                  | -      |   |   |   | (463 | ) |   |   | (463 | ) |
| Balance as of June 30, 2003                                                                                       |   |         | 109,665  |   |               | $      | (*)     |                          |   | $      | 98                                         |   |   | $                                     | 933    |   |   | $ | (541 | ) |   | $ | 490 |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                       |   | Common Stock |    |   | Additional Paid-in |   |   | Receipts on Account of Common |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ Equity |   |
|------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------------------|--------|--------|-------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------|--------|
|                                                                                                       |   | Shares       |    |   | Amount             |   |   | Capital                       |   |   | Stock                                      |   |   | Stage                            |   |   | (Deficiency) |   |
| Balance as of July 1, 2003                                                                                 |   |         | 109,665 |   |               | $      | (*)    |                          |   | $      | 98                                         |   |   | $                                | 933    |   |   | $ | (541 | ) |   | $ | 490 |   |
| Issuance of common stock on July 16, 2003, net     of issuance expenses of $70              |   |         | 3,628   |   |               |   | (*)    |                          |   |   | 1,236                                      |   |   |                             | (933   | ) |   |   | - |   |   |   | 303 |   |
| Issuance of common stock on January 20, 2004                                                               |   |         | 15,000  |   |               |   | (*)    |                          |   |   | -                                          |   |   |                             | -      |   |   |   | - |   |   |   | (*) |   |
| Issuance of warrants on January 20, 2004 for finder’s fee                                            |   |         | -       |   |               |   | -      |                          |   |   | 192                                        |   |   |                             | -      |   |   |   | - |   |   |   | 192 |   |
| Common stock granted to consultants on    February 11, 2004                                 |   |         | 5,000   |   |               |   | (*)    |                          |   |   | 800                                        |   |   |                             | -      |   |   |   | - |   |   |   | 800 |   |
| Stock based compensation related to warrants    granted to consultants on December 31, 2003 |   |         | -       |   |               |   | -      |                          |   |   | 358                                        |   |   |                             | -      |   |   |   | - |   |   |   | 358 |   |
| Exercise of warrants on April 19, 2004                                                                     |   |         | 1,500   |   |               |   | (*)    |                          |   |   | 225                                        |   |   |                             | -      |   |   |   | - |   |   |   | 225 |   |
| Net loss for the year                                                                                      |   |         | -       |   |               |   | -      |                          |   |   | -                                          |   |   |                             | -      |   |   |   | (2,011 | ) |   |   | (2,011 | ) |
| Balance as of June 30, 2004                                                                                |   |         | 134,793 |   |               | $      | (*)    |                          |   | $      | 2,909                                      |   |   | $                                | -      |   |   | $ | (2,552 | ) |   | $ | 357 |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                                                       |   | Common Stock |    |   | Additional Paid-in |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ Equity |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------|--------|
|                                                                                                                                                       |   | Shares       |    |   | Amount             |   |   | Capital                                    |   |   | Stage                            |   |   | (Deficiency) |   |
| Balance as of July 1, 2004                                                                                                                                 |   |         | 134,793 |   |               | $      | (*)    |                                       |   | $      | 2,909                            |   |   | $ | (2,552 | ) |   | $ | 357 |   |
| Stock-based compensation related to warrants granted to consultants     on September 30, 2004                                     |   |         | -       |   |               |   | -      |                                       |   |   | 162                              |   |   |   | - |   |   |   | 162 |   |
| Issuance of common stock and warrants on November 30, 2004     related to the October 2004 Agreement net of issuance costs of $29 |   |         | 16,250  |   |               |   | (*)    |                                       |   |   | 296                              |   |   |   | - |   |   |   | 296 |   |
| Issuance of common stock and warrants on January 26, 2005 related to the     October 2004 Agreement net of issuance costs of $5             |   |         | 21,500  |   |               |   | (*)    |                                       |   |   | 425                              |   |   |   | - |   |   |   | 425 |   |
| Issuance of common stock and warrants on January 31, 2005 related     to the January 31, 2005 Agreement                           |   |         | 35,000  |   |               |   | (*)    |                                       |   |   | -                                |   |   |   | - |   |   |   | (*) |   |
| Issuance of common stock and options on February 15, 2005 to     former director of the Company                                        |   |         | 250     |   |               |   | (*)    |                                       |   |   | 14                               |   |   |   | - |   |   |   | 14 |   |
| Issuance of common stock and warrants on February 16, 2005     related to the January 31, 2005 Agreement                               |   |         | 25,000  |   |               |   | (*)    |                                       |   |   | -                                |   |   |   | - |   |   |   | (*) |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                                            |   | Common Stock |   |   | Additional Paid-in |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ Equity |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|--------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------|--------|
|                                                                                                                                            |   | Shares       |   |   | Amount             |   |   | Capital                                    |   |   | Stage                            |   |   | (Deficiency) |   |
| Issuance of warrants on February 16, 2005 for finder fee related to    the January 31, 2005 Agreement                            |   |         | -      |   |               |   | -      |                                       |   |   | 144                              |   |   |   | - |   |   |   | 144 |   |
| Issuance of common stock and warrants on March 3, 2005 related to    the January 24, 2005 Agreement net of issuance costs of $24 |   |         | 60,000 |   |               |   | (*)    |                                       |   |   | 1,176                            |   |   |   | - |   |   |   | 1,176 |   |
| Issuance of common stock on March 3, 2005 for finder fee related to     the January 24, 2005 Agreement                           |   |         | 9,225  |   |               |   | (*)    |                                       |   |   | (*)                              |   |   |   | - |   |   |   | - |   |
| Issuance of common stock and warrants on March 3, 2005 related to    the October 2004 Agreement net of issuance costs of $6      |   |         | 3,750  |   |               |   | (*)    |                                       |   |   | 69                               |   |   |   | - |   |   |   | 69 |   |
| Issuance of common stock and warrants to the Chief Executive     Officer on March 23, 2005                                       |   |         | 12,000 |   |               |   | (*)    |                                       |   |   | 696                              |   |   |   | - |   |   |   | 696 |   |
| Issuance of common stock on March 23, 2005 related to     the October 2004 Agreement                                             |   |         | 1,000  |   |               |   | (*)    |                                       |   |   | 20                               |   |   |   | - |   |   |   | 20 |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                                          |   | Common Stock |    |   | Additional Paid-in |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ Equity |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------|--------|
|                                                                                                                                          |   | Shares       |    |   | Amount             |   |   | Capital                                    |   |   | Stage                            |   |   | (Deficiency) |   |
| Classification of a liability in respect of warrants to additional    paid in capital, net of issuance costs of $ 178          |   |         | -       |   |               |   | -      |                                       |   |   | 542                              |   |   |   | - |   |   |   | 542 |   |
| Net loss for the year                                                                                                                         |   |         | -       |   |               |   | -      |                                       |   |   | -                                |   |   |   | (2,098 | ) |   |   | (2,098 | ) |
| Balance as of  June 30, 2005                                                                                                        |   |         | 318,768 |   |               |   | (*)    |                                       |   |   | 6,453                            |   |   |   | (4,650 | ) |   |   | 1,803 |   |
| Exercise of warrants on November 28, 2005 to finders related to     the January 24, 2005 agreement                             |   |         | 400     |   |               |   | (*)    |                                       |   |   | -                                |   |   |   | - |   |   |   | - |   |
| Exercise of warrants on January 25 ,2006 to finders related to    the January 25, 2005 Agreement                               |   |         | 50      |   |               |   | (*)    |                                       |   |   | -                                |   |   |   | - |   |   |   | - |   |
| Reclassification of warrants from equity to liabilities due to     application of ASC 815-40 (originally issued as EITF 00-19) |   |         | -       |   |               |   | -      |                                       |   |   | (8                               | )      |   |   | - |   |   |   | (8 | ) |
| Net loss for the year                                                                                                                         |   |         | -       |   |               |   | -      |                                       |   |   | -                                |   |   |   | (2,439 | ) |   |   | (2,439 | ) |
| Balance as of  June  30, 2006                                                                                             |   |         | 319,218 |   |               | $      | (*)    |                                       |   | $      | 6,445                            |   |   | $ | (7,089 | ) |   | $ | (644 | ) |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                   |   | Common Stock |      |   | Additional Paid-in |   |   | Receipts on Account of Common |   |   | Accumulated Other Comprehensive |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------------|--------|--------|-------------------------------|--------|--------|---------------------------------|--------|--------|--------------------------------------------|--------|--------|---------------------------|--------|
|                                                                                                                   |   | Shares       |      |   | Amount             |   |   | Capital                       |   |   | Stock                           |   |   | Loss                                       |   |   | Stage                     |   |   | Equity |   |
| Balance as of  July 1, 2006                                                                                  |   |         | 319,218   |   |               | $      | (*)    |                          |   | $      | 6,445                           |   |   | $                                          | -      |   |                      | $      | - |   |   | $ | (7,089 | ) |   | $ | (644 | ) |
| Conversion of convertible debenture,     net of issuance costs of $440                   |   |         | 1,019,815 |   |               |   | (*)    |                          |   |   | 1,787                           |   |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | 1,787 |   |
| Classification of a liability in respect     of warrants                                                |   |         | -         |   |               |   | -      |                          |   |   | 360                             |   |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | 360 |   |
| Classification of deferred issuance expenses                                                                           |   |         | -         |   |               |   | -      |                          |   |   | (379                            | )      |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | (379 | ) |
| Classification of a liability in respect of      options granted to non-employees consultants |   |         | -         |   |               |   | -      |                          |   |   | 116                             |   |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | 116 |   |
| Compensation related to options granted to     employees and directors                             |   |         | -         |   |               |   | -      |                          |   |   | 2,386                           |   |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | 2,386 |   |
| Compensation related to options granted to     non-employee consultants                            |   |         | -         |   |               |   | -      |                          |   |   | 938                             |   |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | 938 |   |
| Exercise of warrants related to the April 3, 2006     agreement net of issuance costs of $114 |   |         | 75,692    |   |               |   | (*)    |                          |   |   | 1,022                           |   |   |                                       | -      |   |                      |   | - |   |   |   | - |   |   |   | 1,022 |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                                                                              |   | Common Stock |      |   | Additional Paid-in |   |   | Receipts on Account of Common |   |   | Accumulated Other Comprehensive |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ |   |   | Total Comprehensive |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------------|--------|--------|-------------------------------|--------|--------|---------------------------------|--------|--------|--------------------------------------------|--------|--------|---------------------------|--------|--------|---------------------|--------|
|                                                                                                                                                                              |   | Shares       |      |   | Amount             |   |   | Capital                       |   |   | Stock                           |   |   | Loss                                       |   |   | Stage                     |   |   | Equity              |   |   | Loss |   |
| Cashless exercise of warrants related    to the April 3, 2006 agreement                                                                                            |   |         | 46,674    |   |               |   | (*)    |                          |   |   | (*)                             |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | - |   |   |   |   |
| Issuance of common stock on May     and June 2007 related to the May 14,      2007 agreement, net of issuance costs of $64 |   |         | 3,126,177 |   |               |   | (*)    |                          |   |   | 7,751                           |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | 7,751 |   |   |   |   |
| Receipts on account of  shares                                                                                                                                          |   |         | -         |   |               |   | -      |                          |   |   | -                               |   |   |                                       | 368    |   |                      |   | -      |                |   |   | - |   |   |   | 368 |   |   |   |   |
| Cashless exercise of warrants related     to the May 14, 2007 issuance                                                                                        |   |         | 366,534   |   |               |   | (*)    |                          |   |   | (*)                             |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | - |   |   |   |   |
| Issuance of warrants to investors    related to the May 14, 2007 agreement                                                                                         |   |         | -         |   |               |   | -      |                          |   |   | 651                             |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | 651 |   |   |   |   |
| Unrealized loss on available for    sale securities                                                                                                                     |   |         | -         |   |               |   | -      |                          |   |   | -                               |   |   |                                       | -      |   |                      |   | (30    | )                   |   |   | - |   |   |   | (30 | ) |   | $ | (30 | ) |
| Net loss for the year                                                                                                                                                             |   |         | -         |   |               |   | -      |                          |   |   | -                               |   |   |                                       | -      |   |                      |   | -      |                |   |   | (8,429 | ) |   |   | (8,429 | ) |   |   | (8,429 | ) |
| Balance as of June 30, 2007                                                                                                                                                       |   |         | 4,954,110 |   |               | $      | (*)    |                          |   | $      | 21,077                          |   |   | $                                          | 368    |   |                      | $      | (30    | )                   |   | $ | (15,518 | ) |   | $ | 5,897 |   |   |   | - |   |
| Total comprehensive loss                                                                                                                                                          |   |         |      |   |               |   |   |                          |   |   |                            |   |   |                                       |   |   |                      |   |   |                |   |   |   |   |   |   |   |   |   | $ | (8,459 | ) |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                                                    |   | Common Stock |      |   | Additional Paid-in |   |   | Receipts on Account of Common |   |   | Accumulated Other Comprehensive |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ |   |   | Total Comprehensive |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------------|--------|--------|-------------------------------|--------|--------|---------------------------------|--------|--------|--------------------------------------------|--------|--------|---------------------------|--------|--------|---------------------|--------|
|                                                                                                                                    |   | Shares       |      |   | Amount             |   |   | Capital                       |   |   | Stock                           |   |   | Loss                                       |   |   | Stage                     |   |   | Equity              |   |   | Loss |   |
| Balance as of July 1, 2007                                                                                                              |   |         | 4,954,110 |   |               | $      | (*)    |                          |   | $      | 21,077                          |   |   | $                                          | 368    |   |                      | $      | (30    | )                   |   | $ | (15,518 | ) |   | $ | 5,897 |   |   |   |   |
| Issuance of common stock related to    investors relation agreements                                                     |   |         | 69,500    |   |               |   | (*)    |                          |   |   | 275                             |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | 275 |   |   |   |   |
| Issuance of common stock in July 2007 -     June 2008 related to the May 14, 2007     Agreement |   |         | 908,408   |   |               |   | (*)    |                          |   |   | 2,246                           |   |   |                                       | (368   | )      |                      |   | -      |                |   |   | - |   |   |   | 1,878 |   |   |   |   |
| Cashless exercise of warrants related to    the  May 14, 2007 Agreement                                        |   |         | 1,009,697 |   |               |   | (*)    |                          |   |   | (*)                             |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | - |   |   |   |   |
| Compensation related to options     granted to employees and     directors                                |   |         | -         |   |               |   | -      |                          |   |   | 4,204                           |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | 4,204 |   |   |   |   |
| Compensation related to options     granted to non– employees     consultants                       |   |         | -         |   |               |   | -      |                          |   |   | 543                             |   |   |                                       | -      |   |                      |   | -      |                |   |   | - |   |   |   | 543 |   |   |   |   |
| Realized loss on available for     sale securities                                                                       |   |         | -         |   |               |   | -      |                          |   |   | -                               |   |   |                                       | -      |   |                      |   | 30     |                |   |   | - |   |   |   | 30 |   |   | $ | 30 |   |
| Net loss for the year                                                                                                                   |   |         | -         |   |               |   | -      |                          |   |   | -                               |   |   |                                       | -      |   |                      |   | -      |                |   |   | (10,498 | ) |   |   | (10,498 | ) |   |   | (10,498 | ) |
| Balance as of June 30, 2008                                                                                                             |   |         | 6,941,715 |   |               | $      | (*)    |                          |   | $      | 28,345                          |   |   | $                                          | -      |   |                      | $      | -      |                |   | $ | (26,016 | ) |   | $ | 2,329 |   |   |   |   |   |
| Total comprehensive loss                                                                                                                |   |         |      |   |               |   |   |                          |   |   |                            |   |   |                                       |   |   |                      |   |   |                |   |   |   |   |   |   |   |   |   | $ | (10,468 | ) |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                          |   | Common Stock |       |   | Additional Paid-in |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|--------------------|--------|--------|--------------------------------------------|--------|--------|---------------------------|--------|
|                                                                                                          |   | Shares       |       |   | Amount             |   |   | Capital                                    |   |   | Stage                     |   |   | Equity |   |
| Balance as of July 1, 2008                                                                                    |   |         | 6,941,715  |   |               | $      | (*)    |                                       |   | $      | 28,345                    |   |   | $ | (26,016 | ) |   | $ | 2,329 |   |
| Issuance of common stock related to investor relations agreements                                             |   |         | 171,389    |   |               |   | (*)    |                                       |   |   | 133                       |   |   |   | - |   |   |   | 133 |   |
| Issuance of common stock and warrants related to the August 6, 2008 agreement, net of issuance costs of $125  |   |         | 1,391,304  |   |               |   | (*)    |                                       |   |   | 1,475                     |   |   |   | - |   |   |   | 1,475 |   |
| Issuance of common stock and warrants related to the September 2008 agreement, net of issuance costs of $62   |   |         | 900,000    |   |               |   | (*)    |                                       |   |   | 973                       |   |   |   | - |   |   |   | 973 |   |
| Issuance of common stock and warrants in November 2008 -January 2009, net of issuance costs of $39            |   |         | 1,746,575  |   |               |   | (*)    |                                       |   |   | 660                       |   |   |   | - |   |   |   | 660 |   |
| Issuance of common stock and warrants related to the January 20, 2009 agreement, net of issuance costs of $5  |   |         | 216,818    |   |               |   | (*)    |                                       |   |   | 90                        |   |   |   | - |   |   |   | 90 |   |
| Issuance of common stock and warrants related to the January 29, 2009 agreement, net of issuance costs of $90 |   |         | 969,826    |   |               |   | (*)    |                                       |   |   | 1,035                     |   |   |   | - |   |   |   | 1,035 |   |
| Issuance of common stock and warrants related to the May 5, 2009 agreement, net of issuance costs of $104     |   |         | 888,406    |   |               |   | (*)    |                                       |   |   | 1,229                     |   |   |   | - |   |   |   | 1,229 |   |
| Compensation related to options granted to employees and directors                                            |   |         | -          |   |               |   | -      |                                       |   |   | 1,315                     |   |   |   | - |   |   |   | 1,315 |   |
| Compensation related to options and warrants granted to non–employee consultants                        |   |         | -          |   |               |   | -      |                                       |   |   | 97                        |   |   |   | - |   |   |   | 97 |   |
| Compensation related to restricted stock granted to employees and directors                                   |   |         | 427,228    |   |               |   | (*)    |                                       |   |   | 642                       |   |   |   | - |   |   |   | 642 |   |
| Compensation related to restricted stock granted to non–employee consultants                            |   |         | 23,625     |   |               |   | (*)    |                                       |   |   | 52                        |   |   |   | - |   |   |   | 52 |   |
| Net loss for the period                                                                                       |   |         | -          |   |               |   | -      |                                       |   |   | -                         |   |   |   | (6,636 | ) |   |   | (6,636 | ) |
| Balance as of June 30, 2009                                                                                   |   |         | 13,676,886 |   |               | $      | (*)    |                                       |   | $      | 36,046                    |   |   | $ | (32,652 | ) |   | $ | 3,394 |   |

----

|                                                        |
|-------------------------------------------------------------|
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)  |
| U.S. Dollars in thousands (except share and per share data) |

|                                                                                                            |   | Common Stock |       |   | Additional Paid-in |   |   | Deficit Accumulated During the Development |   |   | Total Stockholders’ |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|--------------------|--------|--------|--------------------------------------------|--------|--------|---------------------------|--------|
|                                                                                                            |   | Shares       |       |   | Amount             |   |   | Capital                                    |   |   | Stage                     |   |   | Equity |   |
| Balance as of July 1, 2009                                                                                      |   |         | 13,676,886 |   |               | $      | (*)    |                                       |   | $      | 36,046                    |   |   | $ | (32,652 | ) |   | $ | 3,394 |   |
| Issuance of common stock and warrants related to November 2008 through January 2009 agreements (on July 2009)   |   |         | 1,058,708  |   |               |   | (*)    |                                       |   |   | 794                       |   |   |   | - |   |   |   | 794 |   |
| Issuance of common stock and warrants related to October 2009 agreements, net of issuance costs of $242         |   |         | 2,702,822  |   |               |   | (*)    |                                       |   |   | 2,785                     |   |   |   | - |   |   |   | 2,785 |   |
| Issuance of common stock and warrants related to April 2010 agreements,  net of issuance costs of $54 |   |         | 2,393,329  |   |               |   | (*)    |                                       |   |   | 2,627                     |   |   |   | - |   |   |   | 2,627 |   |
| Issuance of common stock related to investor relations agreements                                               |   |         | 45,033     |   |               |   | (*)    |                                       |   |   | 63                        |   |   |   | - |   |   |   | 63 |   |
| Exercise of options by employee                                                                                 |   |         | 3,747      |   |               |   | (*)    |                                       |   |   | 2                         |   |   |   | - |   |   |   | 2 |   |
| Compensation related to options granted to employees and directors                                              |   |         | -          |   |               |   | -      |                                       |   |   | 211                       |   |   |   | - |   |   |   | 211 |   |
| Compensation related to options and warrants granted to non–employee consultants                          |   |         | -          |   |               |   | -      |                                       |   |   | 161                       |   |   |   | - |   |   |   | 161 |   |
| Compensation related to restricted stock and restricted stock units granted to employees and directors          |   |         | 981,586    |   |               |   | (*)    |                                       |   |   | 1,357                     |   |   |   | - |   |   |   | 1,357 |   |
| Compensation related to restricted stock and restricted stock units granted to non–employee consultants   |   |         | 26,670     |   |               |   | (*)    |                                       |   |   | 40                        |   |   |   | - |   |   |   | 40 |   |
| Net loss for the period                                                                                         |   |         | -          |   |               |   | -      |                                       |   |   | -                         |   |   |   | (7,453 | ) |   |   | (7,453 | ) |
| Balance as of June 30, 2010                                                                                     |   |         | 20,888,781 |   |               | $      | (*)    |                                       |   | $      | 44,086                    |   |   | $ | (40,105 | ) |   | $ | 3,981 |   |

----

|                                  |
|---------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| U.S. Dollars in thousands             |

|                                                                                 |   | Year ended June 30, |   | Period from May 11, 2001 (inception)Through June 30, |   |
|--------------------------------------------------------------------------------------|--------|---------------------|--------|------------------------------------------------------|--------|
|                                                                                 |   | 2010                |   |                                                 | 2009   |   |   | 2008 |   |   | 2010 |   |
|                                                                                 |   |                |   |                                                 |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                |   |                |   |                                                 |   |   |   |   |   |   |   |   |
|                                                                                 |   |                |   |                                                 |   |   |   |   |   |   |   |   |
| Net loss                                                                             |   | $                   | (7,453 | )                                                    |   | $ | (6,636 | ) |   | $ | (10,498 | ) |   | $ | (40,105 | ) |
|                                                                                 |   |                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments to reconcile net loss to net cash used in operating activities:          |   |                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                         |   |                | 207    |                                                 |   |   | 173 |   |   |   | 129 |   |   |   | 752 |   |
| Capital loss                                                                         |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 4 |   |
| Impairment of property and equipment                                                 |   |                | 2      |                                                 |   |   | 5 |   |   |   | 47 |   |   |   | 54 |   |
| Know-how write-off                                                                   |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 2,474 |   |
| Amortization of deferred issuance costs                                              |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 604 |   |
| Stock-based compensation to employees and directors                                  |   |                | 1,568  |                                                 |   |   | 1,957 |   |   |   | 4,204 |   |   |   | 10,115 |   |
| Stock-based compensation to non-employees consultants                                |   |                | 201    |                                                 |   |   | 149 |   |   |   | 561 |   |   |   | 2,499 |   |
| Stock compensation to investor relations consultants                                 |   |                | 63     |                                                 |   |   | 133 |   |   |   | 275 |   |   |   | 1,263 |   |
| Know-how licensors – imputed interest                                          |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 55 |   |
| Salary grant in shares and warrants                                                  |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 711 |   |
| Decrease (increase) in other accounts receivable                                     |   |                | (307   | )                                                    |   |   | (247 | ) |   |   | 336 |   |   |   | (792 | ) |
| Decrease (increase) in prepaid expenses                                              |   |                | 59     |                                                 |   |   | 250 |   |   |   | (308 | ) |   |   | 49 |   |
| Increase (decrease) in trade payables                                                |   |                | 132    |                                                 |   |   | (54 | ) |   |   | 237 |   |   |   | 589 |   |
| Increase (decrease) in other accounts payable and   accrued expenses  |   |                | 120    |                                                 |   |   | (96 | ) |   |   | 74 |   |   |   | (15 | ) |
| Increase in interest receivable on short-term deposit                                |   |                | (15    | )                                                    |   |   | - |   |   |   | - |   |   |   | (15 | ) |
| Increase in accrued interest due to related parties                                  |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 3 |   |
| Linkage differences and interest on long-term  restricted lease deposit    |   |                | 1      |                                                 |   |   | - |   |   |   | - |   |   |   | (1 | ) |
| Change in fair value of liability in respect of warrants                             |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | (2,696 | ) |
| Fair value of warrants granted to investors                                          |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 651 |   |
| Amortization of discount and changes in accrued interest on convertible debentures   |   |                | -      |                                                 |   |   | - |   |   |   | - |   |   |   | 128 |   |
| Amortization of discount and changes in accrued interest from marketable securities  |   |                | -      |                                                 |   |   | (3 | ) |   |   | (1 | ) |   |   | (9 | ) |
| Loss from sale of investments of available-for-sale  marketable securities |   |                | -      |                                                 |   |   | 75 |   |   |   | 31 |   |   |   | 106 |   |
| Impairment and realized loss on available-for-sale marketable securities             |   |                | -      |                                                 |   |   | - |   |   |   | 372 |   |   |   | 372 |   |
| Accrued severance pay, net                                                           |   |                | 14     |                                                 |   |   | 32 |   |   |   | 4 |   |   |   | 66 |   |
| Net cash used in operating activities                                                |   | $                   | (5,408 | )                                                    |   | $ | (4,262 | ) |   | $ | (4,537 | ) |   | $ | (23,138 | ) |

----

|                                  |
|---------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| U.S. Dollars in thousands             |

|                                                           |   | Year ended June 30, |   |   | Period from May 11, 2001 (inception)throughJune 30, |   |
|----------------------------------------------------------------|--------|---------------------|--------|--------|-----------------------------------------------------|--------|
|                                                           |   | 2010                |   |   | 2009                                                |   |   | 2008 |   |   | 2010 |   |
|                                                           |   |                |   |   |                                                |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                          |   |                |   |   |                                                |   |   |   |   |   |   |   |
|                                                           |   |                |   |   |                                                |   |   |   |   |   |   |   |
| Acquisition of Pluristem Ltd. (1)                              |   | $                   | -      |   |                                                | $      | - |   |   | $ | - |   |   | $ | 32 |   |
| Purchase of property and equipment                             |   |                | (389   | )      |                                                |   | (313 | ) |   |   | (840 | ) |   |   | (1,994 | ) |
| Investment in short-term deposits                              |   |                | (2,500 | )      |                                                |   | - |   |   |   | - |   |   |   | (2,500 | ) |
| Repayment of short-term deposits                               |   |                | 1,602  |   |                                                |   | - |   |   |   | - |   |   |   | 1,602 |   |
| Proceeds from sale of property and equipment                   |   |                | -      |   |                                                |   | - |   |   |   | 3 |   |   |   | 32 |   |
| Investment in long-term deposits                               |   |                | (12    | )      |                                                |   | (8 | ) |   |   | (85 | ) |   |   | (229 | ) |
| Repayment of long-term restricted deposit                      |   |                | 3      |   |                                                |   | 38 |   |   |   | 6 |   |   |   | 67 |   |
| Purchase of available for sale marketable securities           |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | (3,784 | ) |
| Proceeds from sale of available for sale marketable securities |   |                | -      |   |                                                |   | 1,113 |   |   |   | 2,201 |   |   |   | 3,314 |   |
| Purchase of know-how                                           |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | (2,062 | ) |
| Net cash provided by (used in) investing activities            |   |                | (1,296 | )      |                                                |   | 830 |   |   |   | 1,285 |   |   |   | (5,522 | ) |
|                                                           |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                          |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common stock and warrants, net of issuance costs   |   | $                   | 5,954  |   |                                                | $      | 5,462 |   |   | $ | 2,246 |   |   | $ | 27,345 |   |
| Exercise of warrants and options                               |   |                | 2      |   |                                                |   | - |   |   |   | - |   |   |   | 1,024 |   |
| Receipts on account of shares                                  |   |                | -      |   |                                                |   |  - |   |   |   | (368 | ) |   |   |  - |   |
| Issuance of convertible debenture                              |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | 2,584 |   |
| Issuance expenses related to convertible debentures            |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | (440 | ) |
| Repayment of know-how licensors                                |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | (300 | ) |
| Repayment of notes and loan payable to related parties         |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | (70 | ) |
| Proceeds from notes and loan payable to related parties        |   |                | -      |   |                                                |   | - |   |   |   | - |   |   |   | 78 |   |
| Receipt of long-term loan                                      |   |                | -      |   |                                                |   | - |   |   |   | 49 |   |   |   | 49 |   |
| Repayment of long-term loan                                    |   |                | (8     | )      |                                                |   | (14 | ) |   |   | (5 | ) |   |   | (27 | ) |
| Net cash provided by financing activities                      |   |                | 5,948  |   |                                                |   | 5,448 |   |   |   | 1,922 |   |   |   | 30,243 |   |
|                                                           |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents               |   |                | (756   | )      |                                                |   | 2,016 |   |   |   | (1,330 | ) |   |   | 1,583 |   |
| Cash and cash equivalents at the beginning of the period       |   |                | 2,339  |   |                                                |   | 323 |   |   |   | 1,653 |   |   |   | - |   |
| Cash and cash equivalents at the end of the period             |   | $                   | 1,583  |   |                                                | $      | 2,339 |   |   | $ | 323 |   |   | $ | 1,583 |   |

----

|                                  |
|---------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| U.S. Dollars in thousands             |

|                                                                     |   | Year ended June 30, |   |   | Period from May 11, 2001 (inception)throughJune 30, |   |
|--------------------------------------------------------------------------|--------|---------------------|--------|--------|-----------------------------------------------------|--------|
|                                                                     |   | 2010                |   |   | 2009                                                |   |   | 2008 |   |   | 2010 |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |
| (a)  Supplemental disclosure of cash flow activities:          |   |                |   |   |                                                |   |   |   |   |   |   |   |
| Cash paid during the period for:                                         |   |                |   |   |                                                |   |   |   |   |   |   |   |
| Taxes paid due to non-deductible expenses                           |   | $                   | 7      |   |                                                | $      | 33 |   |   | $ | 5 |   |   | $ | 54 |   |
| Interest paid                                                            |   | $                   | 2      |   |                                                | $      | 3 |   |   | $ | 3 |   |   | $ | 18 |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| (b)  Supplemental disclosure of non-cash activities:           |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Classification of liabilities and deferred issuance expenses into equity |   | $                   | -      |   |                                                | $      | - |   |   | $ | - |   |   | $ | 97 |   |
| Conversion of convertible debenture                                      |   | $                   | -      |   |                                                | $      | - |   |   | $ | - |   |   | $ | 2,227 |   |
| Purchase of property and equipment in credit                             |   | $                   | 192    |   |                                                | $      | 20 |   |   | $ | 101 |   |   | $ | 192 |   |
| Issuance of shares in consideration of accounts receivable               |   | $                   | 252    |   |                                                | $      | - |   |   | $ | - |   |   | $ | 252 |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| (1) Acquisition of Pluristem Ltd.                                        |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Fair value of assets acquired and                                        |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| liabilities assumed at the acquisition date:                             |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Working capital (excluding cash and cash equivalents)                    |   |                |   |   |                                                |   |   |   |   |   |   |   |   | $ | (427 | ) |
| Long-term restricted lease deposit                                       |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   | 19 |   |
| Property and equipment                                                   |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   | 130 |   |
| In-process research and development write-off                            |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   | 246 |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                |   |   |                                                |   |   |   |   |   |   |   |   | $ | (32 | ) |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| a. | Pluristem Therapeutics Inc., a Nevada corporation, was incorporated and commenced operations on May 11, 2001, under the name A. I. Software Inc. which was changed as of June 30, 2003 to Pluristem Life Systems Inc. On November 26, 2007, its name was changed to Pluristem Therapeutics Inc. Pluristem Therapeutics Inc. has a wholly owned subsidiary, Pluristem Ltd. (“the Subsidiary”), which is incorporated under the laws of Israel. Pluristem Therapeutics Inc. and its Subsidiary are referred to as "the Company". |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b. | The Company is devoting substantially all of its efforts towards conducting research and development of adherent stromal cells production technology and the commercialization of cell therapy products. Accordingly, the Company is considered to be in the development stage, as defined in Accounting Standards Codification TM (“ASC”) 915 (originally issued as Statement of Financial Accounting Standards (“FAS”) No. 7, “Accounting and Reporting by Development stage Enterprises”). In the course of such activities, the Company have sustained operating losses and expects such losses to continue in the foreseeable future. The Company has not generated any revenues or product sales and has not achieved profitable operations or positive cash flows from operations. The Company's accumulated losses during the development stage aggregated to $40,105 through June 30, 2010 and the Company incurred net loss of $7,453 and negative cash flow from operating activities in the amount of $5,408 for the year ended June 30, 2010. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis. The Company plans to continue to finance its operations with sales of equity securities and research and development grants and in the longer term, from revenues from product sales or licensing of its technology. 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 planned products. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c. | Since December 10, 2007, the Company’s shares of common stock have been traded on the NASDAQ Capital Market under the symbol PSTI. The shares were previously traded on the OTC Bulletin Board under the trading symbol “PLRS.OB”. On May 7, 2007, the Company’s shares also began trading on Europe’s Frankfurt Stock Exchange, under the symbol PJT. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES |
|-----------------------------------------|

| a. | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b. | Functional currency of the Subsidiary |
|----|---------------------------------------|

|   | It is anticipated that the majority of the Subsidiary's revenues will be generated outside Israel and will be determined in U.S. Dollars ("dollars"). In addition, most of the financing of the Subsidiary's operations has been made in dollars. The Company's management believes that the dollar is the primary currency of the economic environment in which the Subsidiary operates. Thus, the functional currency of the Subsidiary is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars in accordance with ASC 830, "Foreign Currency Matters" (originally issued as Statement of Financial Accounting Standards (SFAS) 52, “Foreign Currency Translation”). All transaction gains and losses from the remeasurement of monetary balance sheet items are reflected in the statement of operations as financial income or expenses, as appropriate. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c. | Principles of consolidation |
|----|-----------------------------|

|   | The consolidated financial statements include the accounts of Pluristem Therapeutics Inc. and its Subsidiary. Intercompany transactions and balances have been eliminated upon consolidation. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d. | Cash and cash equivalents |
|----|---------------------------|

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

| f. | Long-term restricted deposit |
|----|------------------------------|

|   | Long-term restricted deposit with maturities of more than one year used to secure lease agreement and hedge transactions not designated as hedging accounting instruments are presented at cost. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| g. | Property and Equipment |
|----|------------------------|

|   | Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following annual rates: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                               |   | %                                                                                         |   |
|------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|
| Laboratory equipment               |   |                                                                                      | 10-15  |   |
| Computers and peripheral equipment |   |                                                                                      | 33     |   |
| Office furniture and equipment     |   |                                                                                      | 6-15   |   |
| Vehicles                           |   |                                                                                      | 15     |   |
| Leasehold improvements             |   | over the shorter of the expected useful life or the reasonable assumed term of the lease. |   |

| h. | Impairment of long-lived assets |
|----|---------------------------------|

|   | The Company's long-lived assets and identifiable intangibles are reviewed for impairment in accordance with ASC 360, "Property, Plant and Equipment" (originally issued as SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i. | Accounting for stock-based compensation: |
|----|------------------------------------------|

|   | The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" (originally issued as  SFAS 123R). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated income statements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| i. | Accounting for stock-based compensation (cont.): |
|----|--------------------------------------------------|

|                     |   | Year ended June 30, |      |
|--------------------------|--------|---------------------|-----------|
|                     |   | 2009                |      |   | 2008 |   |
| Risk free interest rate  |   |                | 1.8 - 3.3 | % |   |   | 3.8 - 4.4 | % |
| Dividend yields          |   |                | 0         | % |   |   | 0 | % |
| Volatility               |   |                | 129 -132  | % |   |   | 127 -130 | % |
| Expected term (in years) |   |                | 6         |   |   |   | 6 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| j. | Research and Development expenses and royalty-bearing grants |
|----|--------------------------------------------------------------|

|   | Research and development expenses, net of participations are charged to the Statement of Operations as incurred. |
|--------|------------------------------------------------------------------------------------------------------------------|

|   | Royalty-bearing grants from the government of Israel for funding approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the cost incurred and applied as a deduction from research and development costs. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| k. | Loss per share |
|----|----------------|

|   | Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted net loss per share is computed based on the weighted average number of shares of Common stock outstanding during each year, plus dilutive potential shares of common stock and warrants considered outstanding during the year, in accordance with ASC 260, “Earnings Per Share” (originally issued as SFAS 128).  All outstanding stock options have been excluded from the calculation of the diluted loss per common share because all such securities are anti-dilutive for each of the periods presented. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| l. | Income taxes |
|----|--------------|

|   | The Company accounts for income taxes in accordance with ASC 740, "Income Taxes" (originally issued as SFAS 109). This Topic prescribes the use of the liability method, whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| m. | Concentration of credit risk |
|----|------------------------------|

|   | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term deposits, long-term deposits and restricted deposits. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The majority of the Company’s cash and cash equivalents and short-term and long-term deposits are invested in dollar instruments of major banks in Israel and in the US.  Generally, these deposits may be redeemed upon demand and therefore bear minimal risk. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| n. | Severance pay |
|----|---------------|

|   | The Subsidiary's liability for severance pay is calculated pursuant to Israeli severance pay law based on the most recent salary of the employees multiplied by the number of years of employment, as of the balance sheet date. Employees are entitled to one month's salary for each year of employment or a portion thereof. The Company's liability for all of its employees is fully provided by monthly deposits with insurance policies and by an accrual. The value of these policies is recorded as an asset in the Company's balance sheet. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The deposited funds include profits or losses accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli severance pay law or labor agreements. The value of the deposited funds is based on the cash surrendered value of these policies, and includes immaterial profits or losses. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Severance expenses for the years ended June 30, 2010, 2009 and 2008 amounted to approximately $134, $120, and $88, respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

| o. | Fair value of financial instruments |
|----|-------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| p. | Derivative financial instruments |
|----|----------------------------------|

|   | The fair value of the forward and options contracts as of June 30, 2010 and 2009 were recorded as a liability of $6 and an asset of $67, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | Adoption of New Accounting Standards during the period: |
|--------|----|---------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

|   | 1. | Adoption of New Accounting Standards during the period (cont.) |
|--------|----|----------------------------------------------------------------|

|   | 2. | Recently issued accounting Standards |
|--------|----|--------------------------------------|

|                         |   | June 30, |   |
|------------------------------|--------|----------|--------|
|                         |   | 2010     |   |   | 2009 |   |
|                         |   |     |   |   |   |   |
| In U.S. dollars              |   | $        | 1,271  |   |   | $ | 2,209 |   |
| In New Israeli Shekels (NIS) |   |     | 304    |   |   |   | 130 |   |
| Other currencies             |   |     | 8      |   |   |   | - |   |
|                         |   | $        | 1,583  |   |   | $ | 2,339 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

|                               |   | June 30, |   |
|------------------------------------|--------|----------|--------|
|                               |   | 2010     |   |   | 2009 |   |
| Cost:                              |   |     |   |   |   |   |
| Laboratory equipment               |   | $        | 1,452  |   |   | $ | 1,102 |   |
| Computers and peripheral equipment |   |     | 150    |   |   |   | 125 |   |
| Office furniture and equipment     |   |     | 80     |   |   |   | 50 |   |
| Leasehold improvements             |   |     | 430    |   |   |   | 279 |   |
| Vehicle                            |   |     | 63     |   |   |   | 63 |   |
|  Total Cost                   |   |     | 2,175  |   |   |   | 1,619 |   |
| Accumulated depreciation:          |   |     |   |   |   |   |   |   |
| Laboratory equipment               |   |     | 383    |   |   |   | 254 |   |
| Computers and peripheral equipment |   |     | 116    |   |   |   | 89 |   |
| Office furniture and equipment     |   |     | 24     |   |   |   | 16 |   |
| Leasehold improvements             |   |     | 71     |   |   |   | 40 |   |
| Vehicle                            |   |     | 26     |   |   |   | 17 |   |
| Total accumulated depreciation     |   |     | 620    |   |   |   | 416 |   |
| Property and equipment, net        |   | $        | 1,555  |   |   | $ | 1,203 |   |

|                                       |   | June 30, |   |
|--------------------------------------------|--------|----------|--------|
|                                       |   | 2010     |   |   | 2009 |   |
|                                       |   |     |   |   |   |   |
| Accrued payroll                            |   | $        | 102    |   |   | $ | 63 |   |
| Payroll institutions                       |   |     | 91     |   |   |   | 50 |   |
| Accrued vacation                           |   |     | 150    |   |   |   | 151 |   |
| Liability in respect of hedge transactions |   |     | 5      |   |   |   | - |   |
| Current maturities of long-term obligation |   |     | 24     |   |   |   | 8 |   |
|                                       |   | $        | 372    |   |   | $ | 272 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| a. | The Subsidiary leases facilities under operating lease agreements. The leasing period for the leased area is 62 months as of July 1, 2007.  The monthly payment is 64 thousand NIS starting from September 1, 2007 and is linked to the Israeli Consumer Price Index ("CPI").  The Subsidiary may extend the leasing period by 60 months, if an advanced notice is given. As of June 30, 2010 the monthly payment on leasing is approximately $19. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In order to secure these agreements, the Subsidiary pledged a deposit with the bank in the amount of $96. In addition, the Subsidiary has issued a bank guarantee in favor of the lessor in the amount of $94. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Lease expenses amounted $227, $218 and $193 for the years ended June 30, 2010, 2009 and 2008, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------|

| Year ended June 30, 2011 |   | $      | 222 |   |
|--------------------------|--------|--------|-----|--------|
| Year ended June 30, 2012 |   |   | 222 |   |
| Year ended June 30, 2013 |   |   | 37  |   |
| Total                    |   | $      | 481 |   |

| b. | The Subsidiary leases 15 cars under operating lease agreements, which expire in years 2010 through 2013. The monthly payment is approximately $11 and is linked to the CPI. In order to secure these agreements, the Subsidiary pledged a deposit in the amount of $35. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Lease expenses amounted to $116, $86 and $61 for the years ended June 30, 2010, 2009 and 2008, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------|

| Year ended June 30, 2011 |   | $      | 107 |   |
|--------------------------|--------|--------|-----|--------|
| Year ended June 30, 2012 |   |   | 64  |   |
| Year ended June 30, 2013 |   |   | 26  |   |
| Total                    |   | $      | 197 |   |

| c.     | A deposit in the amount of $50 was pledged by the Subsidiary to secure the hedging transactions and a credit line. |
|----------------------------|--------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| d.     | Under the Law for the Encouragement of Industrial Research and Development, 1984, commonly referred to as the Research Law, research and development programs that meet specified criteria and are approved by a governmental committee of the Office of the Chief Scientist (“OCS”) 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 Chief Scientist of 3% to 5% 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. Effective for grants received from the Chief Scientist under programs approved after January 1, 1999, the outstanding balance of the grants will be subject to interest at a rate equal to the 12 month LIBOR applicable to dollar deposits that is published on the first business day of each calendar year. Following the full repayment of the grant, there is no further liability for royalties. |
|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Through June 30, 2010 and 2009, total grants obtained aggregated $4,104 and $2,640, respectively. |
|--------|---------------------------------------------------------------------------------------------------|

| e.     | See note 7 P relating the May 2007 Agreement. |
|----------------------------|----------------------------------------------------|

| NOTE 7: - SHARE CAPITAL AND STOCK OPTIONS |
|-------------------------------------------|

| a. | On December 22, 2009, the Company’s authorized common stock was increased from 30,000,000 shares with a par value of $0.00001 per share to 100,000,000 shares with a par value of $0.00001 per share.  All shares have equal voting rights and are entitled to one vote per share in all matters to be voted upon by stockholders. The shares have no pre-emptive, subscription, conversion or redemption rights and may be issued only as fully paid and non-assessable shares. Holders of the common stock are entitled to equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by the Board of Directors out of funds legally available. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b. | On July 9, 2001, the Company issued 175,500 shares of common stock in consideration for $2.50, which was received on July 27, 2001. |
|----|-------------------------------------------------------------------------------------------------------------------------------------|

| c. | On October 14, 2002, the Company issued 70,665 shares of common stock at a price of approximately $1.40 per common share in consideration for $100 before issuance costs of $17. On March 19, 2003, two directors each returned 68,250 shares of common stock with a par value of $2 per share, for cancellation, for no consideration. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| d. | In July 2003, the Company issued an aggregate of 3,628 units comprised of 3,628 shares of common stock and 7,256 warrants to a group of investors, for total consideration of $1,236 (net of issuance costs of $70), under a private placement. The consideration was paid partly in the year ended June 30, 2003 ($933) and the balance was paid in the year ended June 30, 2004. In this placement each unit was comprised of one share of common stock and two warrants, the first warrant was exercisable within a year from the date of issuance for one share of common stock at a price of $450 per share. The second warrant is exercisable within five years from the date of issuance for one share of common stock at a price of $540 per share. All the warrants expired unexercised. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e. | On January 20, 2004, the Company consummated a private equity placement with a group of investors (the “Investors”). The Company issued 15,000 units in consideration for net proceeds of $1,273 (net of issuance costs of $227). Each unit is comprised of 15,000 shares of common stock and 15,000 warrants. Each warrant is exercisable into one share of common stock at a price of $150 per share, and may be exercised until January 31, 2007. On March 18, 2004, a registration statement on Form SB-2 was declared effective and the above-mentioned common stock was registered for re-sale. If the effectiveness of the Registration Statement is suspended subsequent to the effective date of registration (March 18, 2004), for more than certain permitted periods, as described in the private equity placement agreement, the Company shall pay penalties to the Investors in respect of the liquidated damages. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f. | In October 2004, the Company consummated a private placement offering (“the October 2004 Agreement”) pursuant to which it issued 42,500 units. Each unit is comprised of one share of common stock and one warrant. The warrant is exercisable for one common stock at an exercise price of $60 per share, subject to certain adjustments.  The units were issued as follows: In November 2004, the Company issued according to the October 2004 Agreement 16,250 units comprised of 16,250 shares of common stock and 16,250 warrants to a group of investors, for total consideration of $296 (net of cash issuance costs of $29), and additional 600 warrants to finders as finders’ fees. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| f. | (cont.) |
|----|---------|

| g. | On January 24, 2005, the Company consummated a private placement offering (the “January 24, 2005 Agreement”) which was closed on March 3, 2005 and issued 60,000 units in consideration for $1,176 (net of cash issuance costs of $24). Each unit is compromised of one share of common stock and one warrant. The warrant is exercisable for one share of common stock at a price of $60 per share. On November 30, 2006, all the warrants expired unexercised. Under this agreement the Company issued to finders 9,225 shares and 2,375 warrants with exercise price of $500 per share exercisable until November 2007. On November 30, 2007, 1,925 unexercised warrants expired. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h. | On January 31, 2005, the Company consummated a private equity placement offering (the “January 31, 2005 Agreement”) with a group of investors according to which it issued 60,000 units in consideration for net proceeds of $1,137 (net of issuance costs of $63).  Each unit is comprised of one share of common stock and one warrant. Each warrant is exercisable into one share of common stock at a price of $60 per share. The January 31, 2005 Agreement includes a finder’s fee of a cash amount equal to 5% of the amount invested ($60) and issuance of warrants for number of shares equal to 5% of the number of shares that were issued (3,000) with an exercise price of $20 per share, subject to certain adjustments, exercisable until November 30, 2006. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| i. | On March 23, 2005, the Company issued 12,000 shares of common stock and 12,000 options as a bonus to the then Chief Executive Officer, Dr. Shai Meretzki, in connection with the issuance of a Notice of Allowance by the United States Patent Office for patent application number 09/890,401. Salary expenses of $696 were recognized in respect of this bonus based on the quoted market price of the Company’s stock and the fair value of the options granted using the Black–Scholes valuation model. On November 30, 2006, all the warrants expired unexercised. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| j. | On February 11, 2004, the Company issued an aggregate amount of 5,000 shares of common stock to a consultant and service provider as compensation for carrying out investor relations activities during the year 2004. Total compensation, measured as the grant date fair market value of the stock, amounted to $800 and was recorded as an operating expense in the statement of operations in the year ended June 30, 2004. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| k. | On November 28, 2005, 400 warrants, which were issued to finders as finder fees related to the January 24, 2005 Agreement, were exercised. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------|

| l. | On January 25, 2006, 50 warrants, which were issued to finders as finder fees related to the January 24, 2005 Agreement, were exercised. |
|----|------------------------------------------------------------------------------------------------------------------------------------------|

| m. | Convertible Debenture |
|----|-----------------------|

|   |   a. | Interest accrued on the Debentures at the rate of 7% per annum, was payable semi-annually on June 30 and December 31 of each year and on conversion and at the maturity date. Interest was payable, at the option of the Company, either (1) in cash, or (2) in shares of common stock at the then applicable conversion price. If the Company failed to deliver stock certificates upon the conversion of the Debentures at the specified time and in the specified manner, the Company was required to make substantial payments to the holders of the Debentures. |
|--------|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   b. | The warrants, issued as of April 3, 2006, become first exercisable on the 65th day after issuance. Holders of the warrants were entitled to exercise their warrants on a cashless basis following the first anniversary of issuance if the Registration Statement is not in effect at the time of exercise. |
|--------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| m.  | Convertible Debenture (Cont.): |
|----------|--------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| n. | On May 14, 2007, the Company consummated a private equity placement with a group of investors for an equity investment (“May 2007 Agreement”). The Company sought a minimum of $7,000 and up to a maximum of $13,500 for shares of the Company’s common stock at a per share price of $2.50, and warrants to purchase shares at an exercise price of $5.00 exercisable until five years after the closing date of the agreement. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In May 2007, under the May 2007 Agreement, the Company issued 3,126,177 shares of the Company’s common stock and 3,126,177 warrants to purchase the Company’s common stock in consideration for $7,751 (net of cash issuance costs of $64). |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During July and August 2007, under the May 2007 Agreement, the Company issued additional 273,828 shares of the Company’s common stock and 273,828 warrants to purchase the Company’s common stock in consideration for $685. The consideration was paid partly prior to the issuance of the shares in the year ended June 30, 2007 ($368) and was recorded as receipts on account of shares and the balance was paid during July and August 2007. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As part of May 2007 Agreement, the Company signed an escrow agreement according to which the Company granted an option to an investor to invest, under the same conditions defined in the May 2007 Agreement, up to $5,000 which will be paid in monthly installments over 10 months starting six months subsequent to the closing date. According to the agreement, in the event that the investor fails to make any of the payments within five days of the payment due date, the option to invest the remaining amount will be cancelled. As a result of this agreement, the Company issued 634,580 shares of the Company’s common stock and 634,580 warrants to purchase the Company’s common stock in consideration for $1,561 (net of cash issuance costs of $25). As of March 31, 2008 the option was cancelled. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The total proceeds related to the May 2007 Agreement accumulated as of June 30, 2008 were $9,997 (net of cash issuance costs of $89), and 4,034,585 shares and 4,034,585 warrants were issued. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In connection with the May 2007 Agreement, the Company issued 275,320 warrants to finders as finders’ fee. The warrants are exercisable for five years from the date of grant at an exercise price of $2.50 per share. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During 2008 and 2007, 1,361,818 and 500,000 warrants related to the May 2007 Agreement were exercised on a cashless basis for 1,009,697 shares of stock and 366,534 shares of stock, respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o. | The Company issued 28,398 warrants to the investors related to the May 2007 Agreement as compensation to investors who delivered the invested amount prior to the closing date of the placement. The warrants are exercisable for five years at an exercise price of $2.50 per share.  The Company recorded the fair value of the warrants as financial expenses in the amount of $651 in the year ended June 30, 2007.  The fair value of these warrants was determined using the Black-Scholes pricing model, assuming a risk free rate of 4.8%, a volatility factor of 128%, dividend yield of 0% and expected life of five years. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| p. | In the May 2007 Agreement, there is a provision that requires the Company for a period of four years (subject to acceleration under certain circumstances) not to sell any of the Company’s common stock for less than $0.0125 per share (pre-split price). The May 2007 Agreement provides that any sale below that price must be preceded by consent from each purchaser in the placement. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The agreement does not contain any provisions for the adjustment of the specified minimum price in the event of stock splits and the like. If such agreement were to have contained such a provision, the floor price would be $2.50. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The majority of purchasers in the private placement have sold the stock purchased in the placement, and thus the number of purchasers whose consent is purportedly required has been substantially reduced. The number of shares outstanding as to which this provision currently applies according the information supplied by transfer agent is 2 million shares. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An agreement that prevents the Company’s Board of Directors from issuing shares that are necessary to finance the Company’s business may be unenforceable. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | It is unclear what could be the consequences of a court decision that the issuance of shares below $2.50 per share violates the May 2007 Agreement. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In connection therewith, the Company approved the issuance of warrants to purchase up to 161,724 shares of its common stock to each of the investors who was a party to the May 2007 Agreement that held shares purchased pursuant to such agreement, as of August 6, 2008, conditioned on having the investors execute a general release pursuant to which the Company will be released from liability including, but not limited to, any claims, demands, or causes of action arising out of, relating to, or regarding sales of certain equity securities notwithstanding the above mentioned provision.  As of June 30, 2010 the Company received a general release from part of the investors, and issued them warrants to purchase 105,583 shares of its common stock. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| q. | On August 6, 2008, the Company sold 1,391,304 shares of the Company’s common stock and warrants to purchase 695,652 shares of common stock at an exercise price of $1.90 to two investors in consideration of $1,600 pursuant to terms of a securities purchase agreement. The placement agent received a placement fee equal to 6% of the gross purchase price of the Units (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. The warrants will be exercisable after six months from the closing date through and including August 5, 2013.  Total cash issuance costs related to this placement amounted to $125. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| r. | On September 22, 2008, the Company sold 900,000 shares of the Company’s common stock and warrants to purchase 675,000 shares of common stock to an investor in consideration for $1,035 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. As part of this transaction, the Company paid a transaction fee to the finders equal to 6% of the actual purchase price and warrants exercisable for five years at an exercise price of $1.50 per share to purchase 54,000 of the Company’s shares of common stock. Total cash issuance costs related to this placement amounted to $62. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| s. | From November 2008 through January 2009, the Company entered into a securities purchase agreement with investors, pursuant to which the Company sold 1,746,575 shares of its common stock at a price of $0.40 per share, for an aggregate purchase price of $699, 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 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 the Company no later than 10 business days following the release of an official announcement by the Company 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 $699, 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. The issuance costs include $39 in cash and warrants exercisable for five years at an exercise price of $1.00 per share to purchase 96,579 of the Company’s shares of common stock. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| t. | On January 20, 2009, the Company sold 216,818 shares of its common stock and warrants to purchase 216,818 shares of common stock to investors in consideration for $95 pursuant to terms of a securities purchase agreement. The price per share of common stock is $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 the Company no later than 10 business days following the release of an official announcement by the Company 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, 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, the Company paid a transaction fee to finders in an amount of $5 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 the Company’s common stock. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| u. | On January 29, 2009, the Company entered into a subscription agreement with certain investors, pursuant to which the Company sold to such investors 969,826 units, each unit consisting of one share of common stock and a warrant to purchase one of the Company’s share of common stock ("Unit"). The purchase price per Unit was $1.16 and the aggregate purchase price for the said Units was approximately $1,125.  The warrants are exercisable 181 days following the issuance thereof for a period of five years thereafter at an exercise price of $1.90 per share.  The Company paid a transaction fee to finders in an amount of $90 in cash and issued them warrants exercisable after six months for five years at an exercise price of $1.90 per share to purchase 80,983 shares of the Company’s common stock. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| v. | On May 5, 2009, the Company entered into securities purchase agreements with two investors pursuant to which the Company sold 888,406 shares of its common stock and warrants to purchase 488,623 shares of common stock in consideration for $1,333.  The exercise price of the warrants is $1.96 per share and they will be exercisable for a period of five years commencing six months following the issuance thereof. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| w. | On July 7, 2009, the Company announced that the first patient has been enrolled in a Phase I clinical trial of its PLX-PAD product.  Upon the occurrence of such event, certain investors had an option from prior agreements from November 2008 through January 2009 to purchase additional shares and warrants. Accordingly, certain investors purchased in July 2009, 1,058,708 shares of common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $794, and warrants to purchase up to an additional 1,058,708 shares of common stock with an exercise price of $1.50 per share.  The warrants are exercisable for a period of 4 years and six months commencing six months following the issuance. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| x. | On October 12, 2009, certain institutional investors purchased 2,702,822 shares of the Company’s common stock and warrants to purchase 1,081,129 shares of common stock. The price per share of common stock was $1.12, and the exercise price of the warrants was $1.60 per share. The warrants will be exercisable for a period of five years commencing six months following the issuance thereof.  The gross proceeds received from this offering were approximately $3,027. Total cash costs related to this placement amounted to $242. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| y. | On April 27, 2010, the Company closed a private placement pursuant to which it sold to certain investors 2,393,329 shares of common stock and warrants to purchase 717,999 shares of common stock and 717,999 shares of common stock, at exercise prices per share of $1.25 (the “$1.25 Warrants”) and $1.40 (the “$1.40 Warrants”), respectively.  The price per share of common stock was $1.12.  The aggregate gross proceeds from the sale of the common stock and the warrants were $2,681.  The warrants are exercisable six months following the issuance thereof, for a period of two and a half years and five years thereafter for the $1.25 Warrants and the $1.40 Warrants, respectively. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| z. | The following table summarizes the issuance of shares of common stock to the Company’s investor relations consultants as compensation for their services since July 1, 2007: |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   |   |                    |   |   |   |                                                        |   |   |   | Expenses in the statements of operations for the |   |
|------------------------------------------|--------|--------|-------------------------|--------|--------|--------|-------------------------------------------------------------|--------|--------|--------|--------------------------------------------------|--------|
| Period of service                        |   |   | Number of shares issued |   |   |   | Fair market value of the shares issued at the issuance date |   |   |   | Year ended June 30, 2008                         |   |   |   | Year ended June 30, 2009 |   |   |   | Year ended June 30, 2010 |   |
| July – December 2007               |   |   | 10,000                  |   |   | $      | 149                                                         |   |   | $      | 149                                              |   |   | $ | - |   |   | $ | - |   |
| February – July 2008               |   |   | 7,500                   |   |   |   | 18                                                          |   |   |   | 18                                               |   |   |   | - |   |   |   | - |   |
| March - September 2008                   |   |   | 3,500                   |   |   |   | 8                                                           |   |   |   | 6                                                |   |   |   | 2 |   |   |   | - |   |
| April – June 2008                  |   |   | 50,000                  |   |   |   | 102                                                         |   |   |   | 102                                              |   |   |   | - |   |   |   | - |   |
| July 2008 – June 2009              |   |   | 16,129                  |   |   |   | 10                                                          |   |   |   | -                                                |   |   |   | 10 |   |   |   | - |   |
| July –September 2008               |   |   | 40,000                  |   |   |   | 46                                                          |   |   |   | -                                                |   |   |   | 46 |   |   |   | - |   |
| October 2008                             |   |   | 750                     |   |   |   | 1                                                           |   |   |   | -                                                |   |   |   | 1 |   |   |   | - |   |
| October 2008                             |   |   | 20,000                  |   |   |   | 12                                                          |   |   |   | -                                                |   |   |   | 12 |   |   |   | - |   |
| December 2008 – November 2009      |   |   | 50,000                  |   |   |   | 24                                                          |   |   |   | -                                                |   |   |   | 14 |   |   |   | 10 |   |
| February – July 2009               |   |   | 9,510                   |   |   |   | 12                                                          |   |   |   | -                                                |   |   |   | 12 |   |   |   | - |   |
| February – April 2009              |   |   | 30,000                  |   |   |   | 32                                                          |   |   |   | -                                                |   |   |   | 32 |   |   |   | - |   |
| April 2009                               |   |   | 3,500                   |   |   |   | 4                                                           |   |   |   | -                                                |   |   |   | 4 |   |   |   | - |   |
| August  2009 – June 2010 |   |   | 45,033                  |   |   |   | 53                                                          |   |   |   | -                                                |   |   |   | - |   |   |   | 53 |   |
| Total                                    |   |   | 285,922                 |   |   | $      | 471                                                         |   |   | $      | 275                                              |   |   | $ | 133 |   |   | $ | 63 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| aa. | Options, warrants, restricted stock and restricted stock units to employees, directors and consultants: |
|-----|---------------------------------------------------------------------------------------------------------|

|   | Each option granted under the 2005 Plan, as it was amended and restated on January 21, 2009 is exercisable through the expiration date of the 2005 Plan, which is December 31, 2018, unless stated otherwise.  The Awards vest over two years from the date of grant, as follows: 25% vests six months after the date of grant, and the remaining Awards vest monthly, in equal instalments over 18 months unless other vesting schedules are specified.  Any Awards that are cancelled or forfeited before expiration become available for future grants. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a.  Options to employees and directors: |
|--------|---------------------------------------------------|

|                                         |   | Year ended June 30,2010 |      |
|----------------------------------------------|--------|-------------------------|-----------|
|                                         |   | Number                  |      |   | Weighted Average Exercise Price |   |   | Weighted Average Remaining Contractual Terms (in years) |   |   | Aggregate Intrinsic Value Price |   |
| Options outstanding at beginning of period   |   |                    | 2,366,106 |   |   | $ | 3.72 |   |   |   |   |   |   |   |
| Options exercised                            |   |                    | (3,747    | ) |   |   | 0.62 |   |   |   |   |   |   |   |
| Options forfeited                            |   |                    | (10,440   | ) |   |   | 3.15 |   |   |   |   |   |   |   |
| Options outstanding at end of the period     |   |                    | 2,351,919 |   |   | $ | 3.73 |   |   |   | 6.87 |   |   | $ | 314 |   |
| Options exercisable at the end of the period |   |                    | 2,218,948 |   |   | $ | 3.91 |   |   |   | 6.79 |   |   | $ | 248 |   |
| Options vested and expected to vest          |   |                    | 2,350,082 |   |   | $ | 3.73 |   |   |   | 6.87 |   |   | $ | 311 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| NOTE 7: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) |
|---------------------------------------------------|

| aa. | Options, warrants, restricted stock and restricted stock units to employees,directors and consultants (cont.): |
|-----|----------------------------------------------------------------------------------------------------------------|

|   | a.  Options to employees and directors (cont.): |
|--------|-----------------------------------------------------------|

|                                |   | Year ended June 30, |   |   | Period from inception through June 30, |   |
|-------------------------------------|--------|---------------------|--------|--------|---------------------------------------------|--------|
|                                |   | 2010                |   |   | 2009                                        |   |   | 2010 |   |
| Research and development expenses   |   | $                   | 73     |   |                                        | $      | 371 |   |   | $ | 2,580 |   |
| General and administrative expenses |   |                | 138    |   |                                        |   | 944 |   |   |   | 5,536 |   |
|                                |   |                |   |   |                                        |   |   |   |   |   |   |   |
|                                |   | $                   | 211    |   |                                        | $      | 1,315 |   |   | $ | 8,116 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| NOTE 7: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) |
|---------------------------------------------------|

| aa. | Options, warrants, restricted stock and restricted stock units to employees,directors and consultants (cont.): |
|-----|----------------------------------------------------------------------------------------------------------------|

|   | b. Options and warrants to non-employees: |
|--------|-------------------------------------------|

|   | On July 17, 2009, the Company granted 90,000 options exercisable at a price of $0.00001 per share to Company consultants under the 2005 Plan. The fair value of these options at the grant date was $116. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      |   | Year ended June 30, 2010 |    |
|-----------------------------------------------------------|--------|--------------------------|---------|
|                                                      |   | Number                   |    |   | Weighted Average Exercise Price |   |   | Weighted Average Remaining Contractual Terms (in years) |   |   | Aggregate Intrinsic Value Price |   |
| Options and warrants outstanding at beginning of period   |   |                     | 336,000 |   |   | $ | 5.48 |   |   |   |   |   |   |   |
| Options and warrants granted                              |   |                     | 90,000  |   |   | $ | (*) |   |   |   |   |   |   |   |
| Options and warrants forfeited                            |   |                     | (36,250 | ) |   | $ | 7.93 |   |   |   |   |   |   |   |
| Options and warrants outstanding at end of the period     |   |                     | 389,750 |   |   | $ | 3.97 |   |   |   | 6.00 |   |   | $ | 109 |   |
|                                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options and warrants exercisable at the end of the period |   |                     | 338,925 |   |   | $ | 4.56 |   |   |   | 5.54 |   |   | $ | 52 |   |
|                                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options and warrants vested and expected to vest          |   |                     | 389,750 |   |   | $ | 3.97 |   |   |   | 6.00 |   |   | $ | 109 |   |

|   | (*)  Par value of $0.00001 per share. |
|--------|-------------------------------------------------|

|   | Compensation expenses related to options and warrants granted to consultants were recorded as follows: |
|--------|--------------------------------------------------------------------------------------------------------|

|                                |   | Year ended June 30, |   |   | Period from inception through June 30, |   |
|-------------------------------------|--------|---------------------|--------|--------|----------------------------------------|--------|
|                                |   | 2010                |   |   | 2009                                   |   |   | 2010 |   |
| Research and development expenses   |   | $                   | 90     |   |                                   | $      | 7 |   |   | $ | 1,606 |   |
| General and administrative expenses |   |                | 71     |   |                                   |   | 90 |   |   |   | 801 |   |
|                                |   | $                   | 161    |   |                                   | $      | 97 |   |   | $ | 2,407 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| NOTE 7: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) |
|---------------------------------------------------|

| aa. | Options, warrants, restricted stock and restricted stock units to employees, directors and consultants (cont.): |
|-----|-----------------------------------------------------------------------------------------------------------------|

|                                 |   | Number |            |
|--------------------------------------|--------|--------|-----------------|
|                                 |   |   |            |   |
| Unvested at the beginning of period  |   |   | 1,012,171       |   |
| Granted                              |   |   | 1,330,508       |   |
| Forfeited                            |   |   | (4,428          | ) |
| Vested                               |   |   | (981,586        | ) |
| Unvested at the end of the period    |   |   |  1,356,665 |   |
| Expected to vest after June 30, 2010 |   |   | 1,321,089       |   |

|                                |   | Year ended June 30, |   |   | Period from inception through June 30, |   |
|-------------------------------------|--------|---------------------|--------|--------|---------------------------------------------|--------|
|                                |   | 2010                |   |   | 2009                                        |   |   | 2010 |   |
| Research and development expenses   |   | $                   | 582    |   |                                        | $      | 250 |   |   | $ | 832 |   |
| General and administrative expenses |   |                | 775    |   |                                        |   | 392 |   |   |   | 1,167 |   |
|                                |   | $                   | 1,357  |   |                                        | $      | 642 |   |   | $ | 1,999 |   |

|   | On August 12, 2010, the Company's Compensation Committee approved a grant of total 270,000 restricted shares to two of our officers as a bonus. The shares will become fully vested upon announcing successful Phase I clinical results that support filing application to the EMA or FDA for Phase II clinical trials. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| aa. | Options, warrants, restricted stock and restricted stock units to employees, directors and consultants (cont.): |
|-----|-----------------------------------------------------------------------------------------------------------------|

|                                 |   | Number |    |
|--------------------------------------|--------|--------|---------|
|                                 |   |   |    |   |
| Unvested at the beginning of period  |   |   | 49,636  |   |
| Granted                              |   |   | 89,931  |   |
| Forfeited                            |   |   | (39,636 | ) |
| Vested                               |   |   | (26,670 | ) |
| Unvested at the end of the period    |   |   | 73,261  |   |
| Expected to vest after June 30, 2010 |   |   | 73,261  |   |

|                              |   | Year ended June 30, |   |   | Period from inception through June 30, |   |
|-----------------------------------|--------|---------------------|--------|--------|--------------------------------------------------|--------|
|                              |   | 2010                |   |   | 2009                                             |   |   | 2010 |   |
| Research and development expenses |   | $                   | 40     |   |                                             | $      | 52 |   |   | $ | 92 |   |
|                              |   | $                   | 40     |   |                                             | $      | 52 |   |   | $ | 92 |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| NOTE 7: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) |
|---------------------------------------------------|

| bb. |  Summary of warrants and options: |
|-----|----------------------------------------|

|  Warrants / Options   |   | Exercise Priceper Share |                |       | Options and Warrants for Common Stock |   |       | Options and WarrantsExercisable |   |   | Weighted Average Remaining Contractual Terms(in years) |   |
|----------------------------|--------|-------------------------|---------------------|------------|---------------------------------------|--------|------------|---------------------------------|--------|--------|--------------------------------------------------------|--------|
| Warrants:                  |   |                    | $ 1.00              |       |                                  |   | 2,072,245  |                            |   |   | 2,072,245                                              |   |   |   | 3.40 |   |
|                       |   |                    | $ 1.12              |       |                                  |   | 146,144    |                            |   |   | 146,144                                                |   |   |   | 2.20 |   |
|                       |   |                    | $ 1.25 – 1.28 |       |                                  |   | 817,999    |                            |   |   | 100,000                                                |   |   |   | 2.50 |   |
|                       |   |                    | $ 1.40 - $ 1.50     |       |                                  |   | 1,914,185  |                            |   |   | 1,196,186                                              |   |   |   | 4.30 |   |
|                       |   |                    | $ 1.60              |       |                                  |   | 1,081,129  |                            |   |   | 1,081,129                                              |   |   |   | 4.78 |   |
|                       |   |                    | $ 1.80 - $ 2.00     |       |                                  |   | 3,140,112  |                            |   |   | 3,140,112                                              |   |   |   | 3.46 |   |
|                       |   |                    | $ 2.50              |       |                                  |   | 106,898    |                            |   |   | 106,898                                                |   |   |   | 1.53 |   |
|                       |   |                    | $ 4.40              |       |                                  |   | 3,750      |                            |   |   | 3,750                                                  |   |   |   | 0.30 |   |
|                       |   |                    | $ 5.00              |       |                                  |   | 2,394,585  |                            |   |   | 2,394,585                                              |   |   |   | 1.99 |   |
| Total warrants             |   |                    |                |       |                                  |   | 11,677,047 |                            |   |   | 10,241,049                                             |   |   |   |   |   |
|                       |   |                    |                |       |                                  |   |       |                            |   |   |                                                   |   |   |   |   |   |
| Options:                   |   |                    | $ 0.00              |       |                                  |   | 90,000     |                            |   |   | 41,255                                                 |   |   |   | 9.04 |   |
|                       |   |                    | $ 0.62              |       |                                  |   | 583,445    |                            |   |   | 459,424                                                |   |   |   | 8.29 |   |
|                       |   |                    | $ 1.04              |       |                                  |   | 92,294     |                            |   |   | 81,264                                                 |   |   |   | 7.86 |   |
|                       |   |                    | $ 2.97              |       |                                  |   | 20,000     |                            |   |   | 20,000                                                 |   |   |   | 7.86 |   |
|                       |   |                    | $ 3.50              |       |                                  |   | 1,021,491  |                            |   |   | 1,021,491                                              |   |   |   | 6.03 |   |
|                       |   |                    | $ 3.72 - $ 3.80     |       |                                  |   | 36,116     |                            |   |   | 36,116                                                 |   |   |   | 5.78 |   |
|                       |   |                    | $ 4.00              |       |                                  |   | 42,500     |                            |   |   | 42,500                                                 |   |   |   | 6.30 |   |
|                       |   |                    | $ 4.38 - $ 4.40     |       |                                  |   | 480,607    |                            |   |   | 480,607                                                |   |   |   | 6.95 |   |
|                       |   |                    | $ 6.80              |       |                                  |   | 36,250     |                            |   |   | 36,250                                                 |   |   |   | 7.37 |   |
|                       |   |                    | $ 8.20              |       |                                  |   | 48,547     |                            |   |   | 48,547                                                 |   |   |   | 6.15 |   |
|                       |   |                    | $ 20.00             |       |                                  |   | 146,669    |                            |   |   | 146,669                                                |   |   |   | 6.70 |   |
| Total options              |   |                    |                |       |                                  |   | 2,597,919  |                            |   |   | 2,414,123                                              |   |   |   |   |   |
| Total warrants and options |   |                    |                | 14,274,966 |                                  |   |       | 12,655,172                      |   |   |                                                   |   |   |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

|                                                      |   | Year ended June 30, |   |   | Period from May 11, 2001 (Inception) through June 30, |   |
|-----------------------------------------------------------|--------|---------------------|--------|--------|------------------------------------------------------------|--------|
|                                                      |   | 2010                |   |   | 2009                                                       |   |   | 2008 |   |   | 2010 |   |
|                                                      |   |                |   |   |                                                       |   |   |   |   |   |   |   |
| Foreign currency translation differences                  |   | $                   | (68    | )      |                                                       | $      | 69 |   |   | $ | (150 | ) |   | $ | (108 | ) |
| Interest on short-term bank credit and bank's expenses    |   |                | 13     |   |                                                       |   | 5 |   |   |   | 13 |   |   |   | 64 |   |
| Interest on long-term loan                                |   |                | 2      |   |                                                       |   | 3 |   |   |   | 3 |   |   |   | 8 |   |
| Interest accrued on know-how licenses                     |   |                | -      |   |                                                       |   | - |   |   |   | - |   |   |   | 69 |   |
| Interest income on deposits                               |   |                | (18    | )      |                                                       |   | (14 | ) |   |   | (25 | ) |   |   | (168 | ) |
| Deferred issuance expenses amortization                   |   |                | -      |   |                                                       |   | - |   |   |   | - |   |   |   | 604 |   |
| Discount amortization                                     |   |                | -      |   |                                                       |   | - |   |   |   | - |   |   |   | 105 |   |
| Interest expenses of debenture                            |   |                | -      |   |                                                       |   | - |   |   |   | - |   |   |   | 74 |   |
| Change in fair value of warrants                          |   |                | -      |   |                                                       |   | - |   |   |   | - |   |   |   | (2,696 | ) |
| Loss related to marketable securities                     |   |                | -      |   |                                                       |   | 66 |   |   |   | 214 |   |   |   | 247 |   |
| Interest expenses related to warrants issued to investors |   |                | -      |   |                                                       |   | - |   |   |   | - |   |   |   | 651 |   |
| Expenses (income) of derivatives                          |   |                | 85     |   |                                                       |   | (51 | ) |   |   | 14 |   |   |   | 62 |   |
|                                                      |   | $                   | 14     |   |                                                       | $      | 78 |   |   | $ | 69 |   |   | $ | (1,088 | ) |

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| A. | Tax laws applicable to the companies: |
|----|---------------------------------------|

|   | 1. | Pluristem Therapeutics Inc. is taxed under U.S. tax laws.  |
|--------|----|-----------------------------------------------------------------|

|   | 2. | The Subsidiary is taxed under the Israeli income Tax Ordinance and was taxed also under the Income Tax (Inflationary Adjustments) Law, 1985 ("the law").  |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| B. | Tax assessments: |
|----|------------------|

| C. | Tax rates applicable to the Company: |
|----|--------------------------------------|

|   | 1. | Pluristem Therapeutics Inc.: |
|--------|----|------------------------------|

|   | 2. | The Subsidiary – |
|--------|----|------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

| C. | Tax rates applicable to the Company (Cont.):: |
|----|-----------------------------------------------|

|   | 2. | The Subsidiary (cont.) – |
|--------|----|--------------------------------|

----

|                                                 |
|------------------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           |
| U.S. Dollars in thousands (except per share amounts) |

|                                                 |   | June 30, |        |
|------------------------------------------------------|--------|----------|-------------|
|                                                 |   | 2010     |        |   | 2009 |   |
| Deferred tax assets:                                 |   |     |        |   |   |   |
| U.S. net operating loss carryforward                 |   | $        |  3,656 |   |   | $ | 3,292 |   |
| Israeli net operating loss carryforward              |   |     | 3,201       |   |   |   | 2,071 |   |
| Allowances and reserves                              |   |     | 54          |   |   |   | 51 |   |
|                                                 |   |     |        |   |   |   |   |   |
| Total deferred tax assets before valuation allowance |   |     | 6,911       |   |   |   | 5,414 |   |
| Valuation allowance                                  |   |     | (6,911      | ) |   |   | (5,414 | ) |
|                                                 |   |     |        |   |   |   |   |   |
| Net deferred tax asset                               |   | $        | -           |   |   | $ | - |   |

|   |   Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit): |
|--------|-----------------------------------------------------------------------------------------------------|

----

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures

----

Item 9B. Other Information

PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

| Name             |   | Position Held With Company                                                        |   | Age |   | Date First Elected or Appointed                  |
|------------------|--------|-----------------------------------------------------------------------------------|--------|-----|--------|--------------------------------------------------|
| Zami Aberman     |   | Chief Executive Officer, President,Directorand Chairman of the Board of Directors |   | 56  |   | September 26, 2005November 21, 2005April 3, 2006 |
| Yaky Yanay       |   | Chief Financial Officer, Secretary                                                |   | 39  |   | November 1, 2006                                 |
| Nachum Rosman    |   | Director                                                                          |   | 64  |   | October 9, 2007                                  |
| Doron Shorrer    |   | Director                                                                          |   | 57  |   | October 2, 2003                                  |
| Hava Meretzki    |   | Director                                                                          |   | 41  |   | October 2, 2003                                  |
| Isaac Braun      |   | Director                                                                          |   | 57  |   | July 6, 2005                                     |
| Israel Ben-Yoram |   | Director                                                                          |   | 49  |   | January 26, 2005                                 |
| Mark Germain     |   | Director                                                                          |   | 60  |   | May 17, 2007                                     |
| Shai Pines       |   | Director                                                                          |   | 56  |   | December 8, 2008                                 |

----

----

----

| § | Appointing, compensating and retaining our registered independent public accounting firm; |
|--------|-------------------------------------------------------------------------------------------|

| § | Overseeing the work performed by any outside accounting firm; |
|--------|---------------------------------------------------------------|

| § | Assisting the Board in fulfilling its responsibilities by reviewing: (i) the financial reports provided by us to the SEC, our stockholders or to the general public, and (ii) our internal financial and accounting controls; and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| § | Recommending, establishing and monitoring procedures designed to improve the quality and reliability of the disclosure of our financial condition and results of operations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| § | Reviewing, negotiating and approving, or recommending for approval by our Board of the salaries and incentive compensation of our executive officers; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| § | Administering our equity based plans and making recommendations to our Board with respect to our incentive–compensation plans and equity–based plans; and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| § | Periodically reviewing and making recommendations to our Board with respect to director compensation. |
|--------|-------------------------------------------------------------------------------------------------------|

----

Item 11. Executive Compensation.

| Nameand Principal Position |   | Year |   | Salary($) (1) |    |   | Stock-based Awards($)(2) |   |    | Non-Equity Incentive Plan Compensation($) |   |   | AllOther Compensation($) |   |   | Total($) |   |
|----------------------------|--------|------|--------|---------------|---------|--------|--------------------------|--------|---------|-------------------------------------------|--------|--------|--------------------------|--------|--------|----------|--------|
| Zami Aberman               |   | 2010 |   |          | 331,917 | (3)    |                     |   | 227,068 |                                      |   |   | 0                        |   |   |     | 0      |   |   |   | 558,985 |   |
| Chief Executive Officer    |   | 2009 |   |          | 247,918 | (3)    |                     |   | 332,380 |                                      |   |   | 0                        |   |   |     | 0      |   |   |   | 580,298 |   |
| Yaky Yanay                 |   | 2010 |   |          | 159,820 |   |                     |   | 107,362 |                                      |   |   | 0                        |   |   |     | 19,385 | (4) |   |   | 286,567 |   |
| Chief Financial Officer    |   | 2009 |   |          | 140,974 |   |                     |   | 159,057 |                                      |   |   | 0                        |   |   |     | 19,220 | (4) |   |   | 319,251 |   |

----

|  (a) | As of July 2009, and upon initiation of our clinical trial, Mr. Aberman’s compensation was increased from $20,000 to $25,000 (before the voluntary reduction discussed below). In addition, Mr. Aberman is entitled once a year to receive an additional amount that equals the monthly consulting fee. The U.S. dollar rate will be not less then 4.35 NIS per $.  All amounts above are paid plus value added tax.  Mr. Aberman will also be entitled to one and a half percent (1.5%) from amounts received by us from non diluting funding and strategic deals. During November 2008 until April 2009, Mr. Aberman participated in a voluntary reduction of 25% of the monthly consulting fee he was entitled to receive, and a full reduction of the annual additional amount that equals the monthly consulting fee, in exchange for issuance of 133,036 shares of our common stock. During May 2009 until April 2010, Mr. Aberman participated in another voluntary reduction of 15%, in exchange for 35,500 shares of our common stock. Starting May 2010, Mr. Aberman agreed to participate in an additional voluntary reduction of 15%, which will last 12 months. In exchange for the salary reduction and waiving his rights to receive 25 accrued vacation days, he received 78,267 shares of our common stock. On August 12, 2010, our Compensation Committee approved a grant of 200,000 restricted shares to Mr. Aberman as a bonus. The shares will become fully vested upon announcing successful Phase I clinical results that support filing application to the EMA or FDA for Phase II clinical trials.                                                                                   |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (b)       | Mr. Yanay's monthly salary was 35,500 NIS.  In addition, Mr. Yanay is entitled once a year to receive an additional amount that equals his monthly salary.  Mr. Yanay is provided with a cellular phone and a company car pursuant to the terms of his agreement.  Furthermore, Mr. Yanay was entitled to a bonus of 1.4% from amounts received by us from non diluting funding and strategic deals. On September 23, 2009, the Board approved that Mr. Yanay's monthly salary will be increased from 35,500 NIS to 42,500 NIS and he will be entitled to a 1.0% bonus of any non diluting amounts received by the company, including strategic deals. During November 2008 until April 2009, Mr. Yanay participated in a voluntary reduction of 25% on the monthly salary he was due to receive, in exchange for the issuance of 45,000 shares of our common stock. During May 2009 until April 2010, Mr. Yanay participated in an additional voluntary reduction of 15% on his monthly salary and a full reduction of his annual additional amount that equals his monthly salary, in exchange for 21,300 shares of common stock. Starting May 2010, Mr. Yanay agreed to participate in another voluntary reduction of 15%, which will last 12 months. In exchange for the salary reduction and waiving his rights to receive 20 accrued vacation days, he received 35,243 shares of our common stock. On August 12, 2010, our Compensation Committee approved a grant of 70,000 restricted shares to Mr. Yanay as a bonus. The shares will become fully vested upon announcing successful Phase I clinical results that support filing application to the EMA or FDA for Phase II clinical trials. |

----

| Number of Securities Underlying Unexercised |   |
|---------------------------------------------|--------|
|                                        |   | Option Awards |   |   | Stock Awards |   |
| Name                                        |   | Number of securities underlying unexercised options (#) exercisable |   |   | Number of securities underlying unexercised options (#) unexercisable |   |   | Option exercise price ($) |   |   | Option expiration date |   |   | Number of shares that have not vested (#) |   |   | Market value of shares that have not vested ($) |   |
| Zami Aberman                                |   |   | 22,500 |   |   |   | - |   |   |   | 4.40 |   |   | 1/16/2016 |   |   |   | - |   |   |   | - |   |
|                                        |   | 30,000 |   |   |   | - |   |   |   | 4.00 |   |   | 10/30/2016 |   |   |   | - |   |   |   | - |   |
|                                        |   | 250,000 |   |   |   | - |   |   |   | 3.50 |   |   | 1/23/2017 |   |   |   | - |   |   |   | - |   |
|                                        |   | 105,000 |   |   |   | - |   |   |   | 4.38 |   |   | 12/25/2017 |   |   |   | - |   |   |   | - |   |
|                                        |   | 91,671 |   |   |   | 18,329 | (1) |   |   | 0.62 |   |   | 10/30/2018 |   |   |   | - |   |   |   | - |   |
|                                        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 46,664 | (3) |   | $ | 53,664 |   |
|                                        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 81,915 | (5) |   | $ | 94,202 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 105,000 | (7) |   | $ | 120,750 |   |
| Yaky Yanay*                                 |   |   | 62,500 |   |   |   | - |   |   |   | 4.38 |   |   | 12/25/2017 |   |   |   | - |   |   |   | - |   |
|                                        |   | 12,500 |   |   |   | - |   |   |   | 4.00 |   |   | 9/17/2016 |   |   |   | - |   |   |   | - |   |
|                                        |   | 50,000 |   |   |   | - |   |   |   | 3.50 |   |   | 1/23/2017 |   |   |   | - |   |   |   | - |   |
|                                        |   | 45,836 |   |   |   | 9,164 | (2) |   |   | 0.62 |   |   | 10/30/2018 |   |   |   | - |   |   |   | - |   |
|                                        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 23,330 | (4) |   | $ | 26,830 |   |
|                                        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 35,243 | (6) |   | $ | 40,529 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 52,500 | (8) |   | $ | 60,375 |   |

|   | (1) | Options to purchase 18,329 shares vest in one installment of 4,583 shares on July 30, 2010, and three installments of 4,582 shares on each of August 30, 2010, September 30, 2010 and October 30, 2010. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Options to purchase 9,164 shares vest in four installments of 2,291 shares on each of July 30, 2010, August 30, 2010, September 30, 2010 and October 30, 2010. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | 46,664 restricted shares vest in eight installments of 5,833 shares on each of July 12, 2010, August 12, 2010, September 12, 2010, October 12, 2010, November 12, 2010, December 12, 2010, January 12, 2011 and February 12, 2011. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (4) | 23,330 restricted shares vest in two installments of 2,917 shares on each of July 12, 2010 and August 12, 2010, and six installments of 2,916 shares on each of September 12, 2010, October 12, 2010, November 12, 2010, December 12, 2010, January 12, 2011 and February 12, 2011. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | 81,915 restricted shares vest in one installment of 40,959 shares on November 10, 2010, and six installments of 6,826 shares on each of December 10, 2010, January 10, 2011, February 10, 2011, March 10, 2011, April 10, 2011 and May 10, 2011. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | 35,243 restricted shares vest in one installment of 17,621 shares on November 10, 2010, and 6 installments of 2,937 shares on December 10, 2010, January 10, 2011, February 10, 2011, March 10, 2011, April 10, 2011 and May 10, 2011. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | 105,000 restricted shares vest in six installments of 5,834 shares on each of July 22, 2010, August 22, 2010, September 22, 2010, October 22, 2010, November 22, 2010, and December 22, 2010, and twelve installments of 5,833 shares on each of January 22, 2011, February 22, 2011, March 22, 2011, April 22, 2011, May 22, 2011, June 22, 2011, July 22, 2011, August 22, 2011, September 22, 2011, October 22, 2011, November 22, 2011 and December 22, 2011. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | 52,500 restricted shares vest in twelve installments of 2,917 shares on each of July 22, 2010, August 22, 2010, September 22, 2010, October 22, 2010, November 22, 2010,  December 22, 2010, January 22, 2011, February 22, 2011, March 22, 2011, April 22, 2011, May 22, 2011 and June 22, 2011, and six installments of 2,916 shares on each of July 22, 2011, August 22, 2011, September 22, 2011, October 22, 2011, November 22, 2011 and December 22, 2011. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name             |   | Fees Earned or Paid in Cash ($) |   |   | Stock-based Awards ($) (1) |   |   | Total ($) |   |
|------------------|--------|---------------------------------|--------|--------|----------------------------|--------|--------|-----------|--------|
| Mark Germain     |   |                            | 9,224  |   |                       |   | 38,590 |      |   |   | 47,814 |   |
| Nachum Rosman    |   |                            | 15,440 |   |                       |   | 38,590 |      |   |   | 54,030 |   |
| Doron Shorrer    |   |                            | 13,738 |   |                       |   | 38,590 |      |   |   | 52,328 |   |
| Hava Meretzki    |   |                            | 9,289  |   |                       |   | 38,590 |      |   |   | 47,879 |   |
| Isaac Braun      |   |                            | 11,270 |   |                       |   | 38,590 |      |   |   | 49,860 |   |
| Israel Ben-Yoram |   |                            | 14,702 |   |                       |   | 38,590 |      |   |   | 53,292 |   |
| Shai Pines       |   |                            | 11,311 |   |                       |   | 38,590 |      |   |   | 49,901 |   |

| (1) | The fair value recognized for the stock-based awards was determined as of the grant date in accordance with FASB ASC Topic 718. Assumptions used in the calculations for these amounts are included in Note 2(i) to our consolidated financial statements for fiscal 2010 included elsewhere in this Annual Report on Form 10-K. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

| Name and Address of Beneficial Owner                                               |   | Beneficial Number of Shares(1) |      |   | Percentage |   |
|------------------------------------------------------------------------------------|--------|--------------------------------|-----------|--------|------------|--------|
|                                                                               |   |                           |      |   |       |   |
| Directors and Named Executive Officers                                             |   |                           |      |   |       |   |
|                                                                               |   |                           |      |   |       |   |
| Zami AbermanChief Executive Officer, Chairman of the Board, President and Director |   |                           | 1,069,740 | (2)    |       |   | 4.8 | % |
|                                                                               |   |                           |      |   |       |   |   |   |
| Shai PinesDirector                                                                 |   |                           | 46,954    |   |       |   | * |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Hava MeretzkiDirector                                                              |   |                           | 147,646   | (3)    |       |   | * |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Doron ShorrerDirector                                                              |   |                           | 169,210   | (4)    |       |   | * |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Israel Ben-YoramDirector                                                           |   |                           | 149,230   | (5)    |       |   | * |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Isaac BraunDirector                                                                |   |                           | 146,377   | (6)    |       |   | * |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Nachum RosmanDirector                                                              |   |                           | 116,204   | (7)    |       |   | * |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Mark GermainDirector                                                               |   |                           | 391,954   | (8)    |       |   | 1.8 | % |
|                                                                               |   |                           |      |   |       |   |   |   |
| Yaky YanayChief Financial Officer and Secretary                                    |   |                           | 445,404   | (9)    |       |   | 2.0 | % |
|                                                                               |   |                           |      |   |       |   |   |   |
| Directors and Executive Officers as a group (9 persons)                            |   |                           | 2,682,719 | (10)   |       |   | 11.50 | % |
|                                                                               |   |                           |      |   |       |   |   |   |
| 5% Shareholders                                                                    |   |                           |      |   |       |   |   |   |
|                                                                               |   |                           |      |   |       |   |   |   |
| Bangor Holdings Ltd.                                                               |   |                           | 4,064,287 | (11)   |       |   | 19.4 | % |
|                                                                               |   |                           |      |   |       |   |   |   |
| Merina Overseas Ltd.                                                               |   |                           | 1,533,334 | (12)   |       |   | 6.8 | % |

----

----

| Plan Category                                                 |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights |      |   | Weighted-average exercise price of outstanding options, warrants and rights |   |   | Number of securities remaining available for future issuance under equity compensation plans |   |
|---------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|-----------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|
| Equity compensation plan approved by security holders (1)     |   |                                                                                        | 2,594,039 |   |                                                                        | $      | 3.88   |                                                                                         |   |   | 781,663 |   |
| Equity compensation plan not approved by security holders (2) |   |                                                                                        | 147,630   |   |                                                                        | $      | 1.71   |                                                                                         |   |   | 12,870 |   |
| Total                                                         |   |                                                                                        | 2,741,669 |   |                                                                        | $      | 3.76   |                                                                                         |   |   | 794,533 |   |

|   | (1) | Includes awards granted under the 2005 Plan. |
|--------|-----|----------------------------------------------|

|   | (2) | Includes awards granted under the 2003 Stock Option Plan and awards not granted under either the 2003 Stock Option Plan or the 2005 Plan. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 13.  Certain Relationships and Related Transactions and Director Independence.

Item 14.  Principal Accounting Fees and Services                                                                                     

|                                                                                                                                                                                                                                                                                                                                                                                                               |   | Twelve months ended on June 30, 2010 |   |   | Twelve months ended on June 30, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 |   |   |                                      |   |
| Audit Fees                                                                         |   | $                                    | 70,000 |   |                                      | $      | 40,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 |   |   |                                      |   |   |   |
| Audit-Related Fees                                                                 |   | None                                 |   |   | None                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 |   |   |                                      |   |   |   |
| Tax Fees                                                                           |   | $                                    | 5,000  |   |                                      | $      | 13,250 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 |   |   |                                      |   |   |   |
| All Other Fees                                                                     |   | $                                    | 8,879  |   |                                      | $      | 19,135 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 |   |   |                                      |   |   |   |
| Total Fees                                                                         |   | $                                    | 83,879 |   |                                      | $      | 72,385 |   |

| 1.     | Pre-approved by our audit committee; or                                                                                                                                                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                   |
| 2.     | entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management. |

----

PART IV

Item 15.  Exhibits.

|  3.1 | Composite Copy of the Company’s Articles of Incorporation as amended on December 22, 2009 (incorporated by reference to Exhibit 3.1 of our quarterly report on Form 10-Q filed February 11, 2009). |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Amended By-laws (incorporated by reference to Exhibit 3.1 of our current report on Form 8-K filed January 22, 2007). |
|-----|----------------------------------------------------------------------------------------------------------------------|

| 4.1 | Form of Common Stock Purchase Warrant (incorporated by reference from Exhibit 4.1 of our current report on Form 8-K filed on October 6, 2009). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Form of Common Stock Purchase Warrant dated April 26, 2010. (incorporated by reference to Exhibit 4.1 of our current report on Form 8-K filed on April 28, 2010). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | Consulting Agreement dated September 26, 2005 between Pluristem Ltd. and Rose High Tech Ltd. (incorporated by reference to Exhibit 10.25 of our quarterly report on Form 10-QSB filed February 9, 2006).+ |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Form of Securities Purchase Agreement dated October 6, 2009 (incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on October 6, 2009). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  10.3 | Assignment Agreement dated May 15, 2007 between Pluristem Therapeutics Inc. and each of Technion Research and Development Foundation Ltd., Shai Meretzki, Dr. Shoshana Merchav (incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on May 24, 2007). |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 | Assignment Agreement dated May 15, 2007 between Pluristem Therapeutics Inc. and Yeda Research and Development Ltd. in (incorporated by reference to Exhibit 10.2 of our current report on Form 8-K filed on May 24, 2007). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5 | Placement Agency Agreement, dated October 6, 2009, between Pluristem Therapeutics Inc. and Roth Capital Partners, LLC.  (incorporated by reference to Exhibit 1.1 of our current report on Form 8-K filed on October 6, 2009). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Form of Regulation D Securities Purchase Agreement for Common Stock and Warrants. (incorporated by reference from Exhibit 10.1 of our current report on Form 8-K filed on April 28, 2010). |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | Form of Regulation S Securities Purchase Agreement for Common Stock and Warrants. (incorporated by reference to Exhibit 10.2 of our current report on Form 8-K filed on April 28, 2010). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 | Summary of Directors’ Ongoing Compensation (incorporated by reference to Exhibit 10.1 of our quarterly report on Form 10-Q filed on November 12, 2009). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.9 | 2003 Stock Option Plan (incorporated by reference to Exhibit 4.1 of our registration statement on Form S-8 filed on December 29, 2003) (Registration no. 333-111591). |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.10 | The Amended and Restated 2005 Stock Option Plan (incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on January 23, 2009). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.11 | Form of Stock Option Agreement under the Amended and Restated 2005 Stock Option Plan. (incorporated by reference to Exhibit 10.4 of our annual report on Form 10-K filed September 23, 2009). + |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Form of Restricted Stock Agreement under the Amended and Restated 2005 Stock Option Plan. (incorporated by reference to Exhibit 10.16 of our annual report on Form 10-K filed September 23, 2009). + |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.13 | Form of Restricted Stock Agreement (Israeli directors and officers) under the Amended and Restated 2005 Stock Option Plan. (incorporated by reference to Exhibit 10.17 of our annual report on Form 10-K filed September 23, 2009). + |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.1 | Code of Business Conduct and Ethics and Compliance Program adopted by the Board of Directors (incorporated by reference to Exhibit 14.1 of our annual report on Form 10-KSB filed on September 23, 2005). |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21.1 | List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 of our annual report on Form 10-K filed on September 29, 2008). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------|

| 23.1* | Consent of Kost Forer Gabbay & Kasierer, A member of Ernst & Young Global. |
|-------|------------------------------------------------------------------------------------|

| 31.1* | Certification pursuant to Rule 13a-14(a)/15d-14(a) of Zami Aberman. |
|-------|---------------------------------------------------------------------|

| 31.2* | Certification pursuant to Rule 13a-14(a)/15d-14(a) of Yaky Yanay. |
|-------|-------------------------------------------------------------------|

| 32.1** | Certification pursuant to 18 U.S.C. Section 1350 of Zami Aberman. |
|--------|-------------------------------------------------------------------|

| 32.2** | Certification pursuant to 18 U.S.C. Section 1350 of Yaky Yanay. |
|--------|-----------------------------------------------------------------|

----

----

----