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<SEC-DOCUMENT>0001062993-07-001967.txt : 20070521
<SEC-HEADER>0001062993-07-001967.hdr.sgml : 20070521
<ACCEPTANCE-DATETIME>20070521142447
ACCESSION NUMBER:		0001062993-07-001967
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20070331
FILED AS OF DATE:		20070521
DATE AS OF CHANGE:		20070521

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PLURISTEM LIFE SYSTEMS INC
		CENTRAL INDEX KEY:			0001158780
		STANDARD INDUSTRIAL CLASSIFICATION:	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
		IRS NUMBER:				980351734
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-31392
		FILM NUMBER:		07867442

	BUSINESS ADDRESS:	
		STREET 1:		MATAM ADVANCED TECHNOLOGY PARK
		STREET 2:		BUILDING NO. 20
		CITY:			HAIFA
		STATE:			L3
		ZIP:			31905
		BUSINESS PHONE:		972-4-850-1080

	MAIL ADDRESS:	
		STREET 1:		MATAM ADVANCED TECHNOLOGY PARK
		STREET 2:		BUILDING NO. 20
		CITY:			HAIFA
		STATE:			L3
		ZIP:			31905

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AI SOFTWARE INC
		DATE OF NAME CHANGE:	20010906
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>form10qsb.htm
<DESCRIPTION>QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2007
<TEXT>
<!DOCTYPE HTML PUBLIC "form10qsb.pdf">


<HTML>
<HEAD>
   <TITLE>Filed by Automated Filing Services Inc. (604) 609-0244 - Pluristem Life Systems, Inc. - Form 10-QSB</TITLE>
   <META name="HandheldFriendly" content="true">
</HEAD>

<BODY style="font-size:10pt;">

<HR noshade align="center" width=100% size=3 color="black">
<A name=page_1></A>
<P align=center><B><FONT size=5>UNITED STATES </FONT><BR>
  </B><STRONG><FONT
size=5>SECURITIES AND EXCHANGE COMMISSION </FONT></STRONG><BR>
  Washington, D.C. 20549 </P>
<P align=center><B><FONT size=5>FORM 10-QSB </FONT></B></P>
<P align=center>(Mark One) </P>
<P align=center>[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 </P>
<P align=center>For the quarterly period ended <B><U>March 31, 2007 </U></B></P>
<P align=center>[&nbsp;&nbsp; ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT </P>
<P align=center>For the transition period from __________ to __________</P>
<P align=center>Commission file number <B><U>001-31392</U></B><B> </B></P>
<P align=center><B><U><FONT size=5>PLURISTEM LIFE SYSTEMS, INC.
<BR></FONT></U></B>(Exact name of small business issuer as specified in its
charter) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=center><u><B>Nevada </B></u></TD>
    <TD align=center width="50%"><u><B>98-0351734 </B></u></TD>
  </TR>
  <TR vAlign=top>
    <TD align=center>(State or other jurisdiction of incorporation or organization)
    </TD>
    <TD align=center width="50%">(IRS Employer Identification No.) </TD>
  </TR>
</TABLE>
<P align=center><B><U>MATAM Advanced Technology Park, Building No. 20, Haifa,
Israel 31905</U> <BR></B>(Address of principal executive offices) </P>
<P align=center><B><U>011-972-4-850-1080</U> <BR></B>(Issuer's telephone number)
</P>
<P align=center><B><U>N/A</U> <BR></B>(Former name, former address and former
fiscal year, if changed since last report) </P>
<P align=center>Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during <BR>the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been <BR>subject to such filing requirements for the past
90 days. Yes [X] No [&nbsp; &nbsp;] </P>
<P align=center>Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). <BR>Yes [&nbsp;&nbsp; ] No [X]
</P>
<P align=center><B>APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY<BR>
PROCEEDINGS DURING THE PRECEDING FIVE YEARS </B></P>
<P align=center>Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the <BR>Exchange Act after
the distribution of securities under a plan confirmed by a court. Yes [&nbsp;
&nbsp;] No [&nbsp; &nbsp;] </P>
<P align=center><B>APPLICABLE ONLY TO CORPORATE ISSUERS </B></P>
<P align=center>State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable <BR>date 840,409,801
common shares issued and outstanding as of May 21, 2007 </P>
<P align=center>Transitional Small Business Disclosure Format (Check one): Yes
[&nbsp;&nbsp; ] No [X]</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_2></A>
<P align=center><B>PART I - FINANCIAL INFORMATION </B></P>
<P align=justify><B>Item 1. Financial Statements. <BR></B></P>
<P align=justify>It is the opinion of management that the consolidated interim
  financial statements for the quarter ended March 31, 2007, include all adjustments
  necessary in order to ensure that the consolidated interim financial statements
  are not misleading. </P>
<P align=center>&nbsp;</P>
<P align=center>2</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-1></A>
<P align=center><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY&nbsp;<BR>
  </B>(A Development Stage Company)<B> <BR>
  (Previous Name - A. I. SOFTWARE INC.) </B></P>
<P align=center><B>CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P align=center><B>As of March 31, 2007 </B></P>
<P align=center><B>IN U.S. DOLLARS </B></P>
<P align=center>&nbsp;</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-2></A>
<P align=center><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY <BR>
  </B>(A Development Stage Company)<B> <BR>
  (Previous Name - A. I. SOFTWARE INC.) </B></P>
<P align=center><B>CONSOLIDATED FINANCIAL STATEMENTS </B></P>
<P align=center><B>As of March 31, 2007 </B></P>
<P align=center><B>IN U.S. DOLLARS </B></P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P align=center><B><U>INDEX</U></B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=right width="15%"><B><U>Page</U></B> </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="15%">&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_F-3">Consolidated Balance Sheet </A></TD>
    <TD align=right width="15%" bgColor=#eeeeee><A
      href="#page_F-3">2-3 </A></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><A
      href="#page_F-5">Consolidated Statements of Operations </A></TD>
    <TD align=right width="15%"><A
      href="#page_F-5">4</A></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_F-6">Statements of changes in Stockholders&#146; Equity (Deficiency)
      </A></TD>
    <TD align=right width="15%" bgColor=#eeeeee><A
      href="#page_F-6">5-10</A></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><A
      href="#page_F-12">Consolidated Statements of Cash Flows </A></TD>
    <TD align=right width="15%"><A
      href="#page_F-12">11-12</A></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><A
      href="#page_F-14">Notes to Consolidated Financial Statements </A></TD>
    <TD align=right width="15%" bgColor=#eeeeee><A
      href="#page_F-14">13-28</A></TD>
  </TR>
</TABLE>
<BR>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-3></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>CONSOLIDATED BALANCE
      SHEET (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>March 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>ASSETS</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CURRENT ASSETS: </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Cash and cash equivalents </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;4,561,645 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Prepaid expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>56,808 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Other accounts receivables </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">290,931 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><U>Total </U>current assets </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>4,909,384 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>LONG-TERM RESTRICTED LEASE DEPOSIT </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>51,599 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>SEVERANCE PAY FUND </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>77,364 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>PROPERTY AND EQUIPMENT, NET </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>411,630 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><U>Total </U>assets </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;5,449,977 </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
  </TR>
</TABLE>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  2</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-4></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>CONSOLIDATED BALANCE
      SHEET (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>March 31,</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B>
    </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CURRENT LIABILITIES: </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Trade payables </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;354,820 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Accrued expenses </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">175,388 </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Other accounts payable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>2,155,279 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><U>Total </U>current liabilities </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">2,685,487 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>LONG-TERM LIABILITIES </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Accrued severance pay </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">94,784 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>STOCKHOLDERS&#146; EQUITY</B> </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Share capital: </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp;Common stock $0.00001 par value: </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Authorized: 1,400,000,000
      shares </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp;Issued and Outstanding: 275,804,451 shares
    </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">2,757 </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Additional paid-in capital </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>10,444,802 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Receipts on account of shares </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">4,200,000 </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Deficit accumulated during the development
      stage </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(11,977,853</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#e6efff>) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">2,669,706 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;5,449,977 </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left
    width="2%">&nbsp;</TD>
  </TR>
</TABLE>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  3</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-5></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>CONSOLIDATED STATEMENTS
      OF OPERATIONS (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except share and per share data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%"><B>Period From</B> </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%"><B>May 11, 2001</B> </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%">&nbsp; </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%"><B>(Inception)</B> </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD colspan="4" align=center><B>Nine Month Period Ended</B> </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD colspan="4" align=center><B>Three Month Period Ended</B> </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%"><B>Through</B> </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD colspan="4" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
        31,</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="2%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD colspan="4" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
        31,</B> </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="11%"><B>March 31,</B> </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>2007</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="2%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>2006</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="2%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>2007</B> </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>2006</B> </TD>
      <TD align=center width="2%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>2007</B> </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD >&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff >Research and development costs, net </TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="11%" bgColor=#e6efff>&nbsp;3,340,666 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="11%" bgColor=#e6efff>&nbsp;867,843 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="11%" bgColor=#e6efff>&nbsp;2,792,277 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="11%" bgColor=#e6efff>&nbsp;347,665 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="11%" bgColor=#e6efff>&nbsp;7,429,627 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD >&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff >General and administrative expenses </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="11%" bgColor=#e6efff>1,997,985 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="11%" bgColor=#e6efff>666,105 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="11%" bgColor=#e6efff>1,136,098 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="11%" bgColor=#e6efff>253,426 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="11%" bgColor=#e6efff>6,191,894 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left ></TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp;</TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
      <TD align=left width="1%" ></TD>
      <TD align=left width="11%"></TD>
      <TD align=left width="2%" ></TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff >In-process research and development write-off
      </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>- </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>- </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>246,470 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="11%">5,338,651 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="11%">1,533,948 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="11%">3,928,375 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="11%">601,091 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="11%">13,867,991 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff ></TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >Financial expenses (income), net </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%">(449,878</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%">(44,200</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="11%">(5,843</TD>
      <TD align=left width="2%" >) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%">27,491 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%">(1,890,138</TD>
      <TD align=left width="2%" >) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff >&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left ></TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp; </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp; </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp; </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp; </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp; </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff >Net loss for the period </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;4,888,773 </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;1,489,748 </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;3,922,532 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;628,582 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;11,977,853 </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD >&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff >Basic and diluted net loss per share </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;(0.026</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
     bgColor=#e6efff>) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;(0.03</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
     bgColor=#e6efff>) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;(0.015</TD>
      <TD align=left width="2%"  bgColor=#e6efff>) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;(0.01</TD>
      <TD align=left width="2%"  bgColor=#e6efff>) </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD >&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="11%">&nbsp; </TD>
      <TD width="2%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff >Weighted average number of shares used in
      </TD>
      <TD align=left width="1%"  bgColor=#e6efff></TD>
      <TD align=left width="11%" bgColor=#e6efff></TD>
      <TD align=left width="2%"  bgColor=#e6efff></TD>
      <TD align=left width="1%"  bgColor=#e6efff></TD>
      <TD align=left width="11%" bgColor=#e6efff></TD>
      <TD align=left width="2%"  bgColor=#e6efff></TD>
      <TD align=left width="1%"  bgColor=#e6efff></TD>
      <TD align=left width="11%" bgColor=#e6efff></TD>
      <TD align=left width="2%"  bgColor=#e6efff></TD>
      <TD align=left width="1%"  bgColor=#e6efff></TD>
      <TD align=left width="11%" bgColor=#e6efff></TD>
      <TD align=left width="2%"  bgColor=#e6efff></TD>
      <TD align=left width="1%"  bgColor=#e6efff></TD>
      <TD align=left width="11%" bgColor=#e6efff></TD>
      <TD align=left width="2%"  bgColor=#e6efff></TD>
    </TR>
    <TR vAlign=top>
      <TD align=left >computing basic and diluted net loss per share: </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="11%">190,129,562 </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="11%">50,180,355 </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="2%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="11%">267,818,552 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="11%">63,740,816 </TD>
      <TD align=left width="2%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="11%">&nbsp; </TD>
      <TD align=left width="2%" >&nbsp;</TD>
    </TR>
  </TABLE>
</DIV>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements.<BR>
  4</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-6></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>STATEMENTS OF CHANGES
      IN STOCKHOLDERS&#146; EQUITY (DEFICIENCY) (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except shares data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Deficit</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Accumulated</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Total</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Additional</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Receipts</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>during the</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Stockholders&#146;</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD colspan="4" align=center><B>Common Stock</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>paid-in</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>On account</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Development</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Equity</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Shares</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Amount</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Capital</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%"><B>of
        shares</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Stage</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>(Deficiency)</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock on July 9, 2001
      </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>35,000,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>&nbsp;350 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>&nbsp;2,150 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>&nbsp;- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>&nbsp;- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>&nbsp;2,500 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff><B>Balance as of June 30, 2001</B> </TD>
      <TD align=right width="9%" bgColor=#e6efff>35,000,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>350 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>2,150 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>2,500 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Net loss </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="9%">(77,903</TD>
      <TD align=left width="1%">) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="9%">(77,903</TD>
      <TD align=left width="1%">) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left><B>Balance as of June 30, 2002</B> </TD>
      <TD align=right width="9%">35,000,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">350 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">2,150 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">(77,903</TD>
      <TD align=left width="1%">) </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">(75,403</TD>
      <TD align=left width="1%">) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock on October 14, 2002, </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp;Net of issuance expenses of $17,359
      </TD>
      <TD align=right width="9%" bgColor=#e6efff>14,133,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>141 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>83,450 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>83,591 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Forgiveness of debt </TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">11,760 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">11,760 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Stocks cancelled on March 19, 2003 </TD>
      <TD align=right width="9%" bgColor=#e6efff>(27,300,000</TD>
      <TD align=left width="1%" bgColor=#e6efff>) </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>(273</TD>
      <TD align=left width="1%" bgColor=#e6efff>) </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>273 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Receipts on account of stock and warrants, net </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;of finders and legal
        fees of $56,540 </TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>933,464 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>933,464 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Net loss </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">(462,995</TD>
      <TD align=left width="1%">) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">(462,995</TD>
      <TD align=left width="1%">) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left><B>Balance as of June 30, 2003</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">21,833,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;218 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;97,633 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;933,464 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;(540,898</TD>
      <TD align=left width="1%">) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;490,417 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
  </TABLE>
</DIV>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  5</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-7></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>STATEMENTS OF CHANGES
      IN STOCKHOLDERS&#146; EQUITY (DEFICIENCY) (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except share and per share data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Deficit</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>accumulated</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Total</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Additional</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Receipts</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>During the</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Shareholders&#146;</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD colspan="4" align=center><B>Common Stock</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>paid-in</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>on account</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>development</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Equity</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Shares</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Amount</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Capital</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%"><B>of
        shares</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>stage</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>(Deficiency)</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff><B>Balance as of July 1, 2003</B> </TD>
      <TD align=right width="9%" bgColor=#e6efff>21,833,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;218 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;97,633 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;933,464 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;(540,898</TD>
      <TD align=left width="1%" bgColor=#e6efff>) </TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;490,417 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock on July 16, 2003,
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp;net of issuance expenses of $70,110 </TD>
      <TD align=right width="9%">725,483 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">7 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">1,235,752 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">(933,464</TD>
      <TD align=left width="1%">) </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">302,295 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock on January 20, </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;2004 </TD>
      <TD align=right width="9%">3,000,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">30 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">30 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of warrants on January 20, 2004
        for </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;finder&#146;s fee </TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">192,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">192,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Common stock granted to consultants on </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp;February 11, 2004 </TD>
      <TD align=right width="9%">1,000,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">10 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">799,990 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">800,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Stock based compensation related to warrants
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;granted to consultants on December 31,
      </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;2003 </TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>357,618 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>357,618 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Exercise of warrants on </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp;April 19, 2004 </TD>
      <TD align=right width="9%" bgColor=#e6efff>300,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>3 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>224,997 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>225,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Net loss for the year </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">(2,010,350</TD>
      <TD align=left width="1%">) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">(2,010,350</TD>
      <TD align=left width="1%">) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left><B>Balance as of June 30, 2004</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">26,858,483 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;268 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;2,907,990 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;(2,551,248</TD>
      <TD align=left width="1%">) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">&nbsp;357,010 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
  </TABLE>
</DIV>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements.<BR>
  6</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-8></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>STATEMENTS OF CHANGES
      IN STOCKHOLDERS&#146; EQUITY (DEFICIENCY) (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except share and per share data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Deficit</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>accumulated</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Total</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Additional</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>During the</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Shareholders&#146;</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD colspan="4" align=center><B>Common Stock</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>paid-in</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>development</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD align=center width="9%"><B>Equity</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Shares</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Amount</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>capital</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>stage</B> </TD>
      <TD align=center width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>(Deficiency)</B> </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff><B>Balance as of July 1, 2004</B> </TD>
      <TD align=right width="9%" bgColor=#e6efff>26,858,483 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;268 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;2,907,990 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;(2,551,248</TD>
      <TD align=left width="1%" bgColor=#e6efff>) </TD>
      <TD align=left width="1%" bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>&nbsp;357,010 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Stock-based compensation related to warrants
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp;granted to consultants on September 30, 2004
      </TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">161,641 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">161,641 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock and warrants on </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;November 30, 2004 related
        to the October 2004 </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;Agreement net of issuance costs of $28,908
      </TD>
      <TD align=right width="9%">3,250,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">33 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">296,059 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">296,092 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock and warrants on </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>January 26, 2005 related to the October 2004
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;Agreement net of issuance costs of $4,975
      </TD>
      <TD align=right width="9%">4,300,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">43 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">424,982 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">425,025 </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock and warrants on </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>January 31, 2005 related to the January 31,
        2005 </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>70 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;Agreement </TD>
      <TD align=right width="9%">7,000,000 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">70 </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock and options on February
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;15, 2005 to former director of the Company
      </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; </TD>
      <TD align=right width="9%" bgColor=#e6efff>50,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>(*) </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>14,500 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>14,500 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="1%">&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock and warrants on
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>February 16, 2005 related to the January 31, 2005 </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="1%">&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Agreement </TD>
      <TD align=right width="9%" bgColor=#e6efff>5,000,000 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>50 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>50 </TD>
      <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    </TR>
  </TABLE>
</DIV>
<P align=justify>(*) Less then one dollar </P>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  7</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-9></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>STATEMENTS OF CHANGES
      IN STOCKHOLDERS&#146; EQUITY (DEFICIENCY) (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except share and per share data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Deficit</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>accumulated</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Total</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Additional</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>During the</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Shareholders&#146;</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD colspan="4" align=center><B>Common Stock</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>paid-in</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>development</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Equity</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Shares</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Amount</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>capital</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>stage</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>(Deficiency)</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of warrants on February 16, 2005
        for finder fee </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;related to the January 31, 2005 Agreement
      </TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">144,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">144,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock and warrants on </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>March 3, 2005 related to the January 24,
        2005 </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;Agreement net of issuance costs of $24,000
      </TD>
      <TD align=right width="9%">12,000,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">120 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">1,175,880 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">1,176,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock on March 3, 2005 for finder </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;fee related to the January
        24, 2005 Agreement </TD>
      <TD align=right width="9%" bgColor=#e6efff>1,845,000 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>18 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>(18</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock and warrants on
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>March 3, 2005 related to the October 2004 Agreement </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;net of issuance costs
        of $6,038 </TD>
      <TD align=right width="9%" bgColor=#e6efff>750,000 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>8 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>68,954 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>68,962 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Issuance of common stock and warrants to
        the Chief </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;Executive Officer on March 23, 2005 </TD>
      <TD align=right width="9%">2,400,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">24 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">695,976 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">696,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Issuance of common stock on March 23, 2005 related to </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;the October 2004 Agreement
      </TD>
      <TD align=right width="9%" bgColor=#e6efff>200,000 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>2 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>19,998 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>20,000 </TD>
      <TD align=left width="1%"
  bgColor=#e6efff>&nbsp;</TD>
    </TR>
  </TABLE>
</DIV>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  8</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-10></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>STATEMENTS OF CHANGES
      IN STOCKHOLDERS&#146; EQUITY (DEFICIENCY) (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except share and per share data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Deficit</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>accumulated</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Total</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Additional</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>during the</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Shareholders&#146;</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD colspan="4" align=center><B>Common Stock</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>paid-in</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>development</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Equity</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=center>&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Shares</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>Amount</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>capital</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>stage</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>(Deficiency)</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Classification of a liability in respect
        of warrants to </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; &nbsp; &nbsp;additional paid in capital, net of issuance
        costs of $ </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;178,116 </TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>541,884 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>541,884 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Net loss for the year </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>(2,098,108</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>(2,098,108</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left><B>Balance as of June 30, 2005</B> </TD>
      <TD align=right width="9%">63,653,483 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">636 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">6,451,846 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">(4,649,356</TD>
      <TD align=left width="1%" >) </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">1,803,126 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Exercise of warrants on November 28, </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>2005 to finders related to the January 24,
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>2005 agreement </TD>
      <TD align=right width="9%">80,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">(*) </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Exercise of warrants on January 25 ,2006 </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>To finders related to the January 25, 2005
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Agreement </TD>
      <TD align=right width="9%">10,000 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">(*) </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Reclassification of warrants from equity </TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>To liabilities due to application of EITF
      </TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>00-19 (**) </TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">(7,632</TD>
      <TD align=left width="1%" >) </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">(7,632</TD>
      <TD align=left width="1%" >) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Net loss for the year </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">(2,439,724</TD>
      <TD align=left width="1%" >) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="9%">(2,439,724</TD>
      <TD align=left width="1%" >) </TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left><B>Balance as of June 30, 2006</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">63,743,483 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%">636
      </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">6,444,214 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">(7,089,080</TD>
      <TD align=left width="1%" >) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="9%">(644,230</TD>
      <TD align=left width="1%" >) </TD>
    </TR>
  </TABLE>
</DIV>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  9</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-11></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>STATEMENTS OF CHANGES
      IN STOCKHOLDERS&#146; EQUITY (DEFICIENCY) (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars (except share and per share data)</B> </TD>
  </TR>
</TABLE>
<BR>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="8%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="8%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Deficit</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="8%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="8%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>accumulated</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Total</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=center width="8%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="8%">&nbsp; </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Additional</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Receipts</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>during the</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Shareholders&#146;</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD colspan="4" align=center><B>Common Stock</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>paid-in</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>On Account</B></TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"
      ><STRONG>&nbsp;development</STRONG>&nbsp;&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD align=center width="9%"><B>Equity</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="8%"><B>Shares</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="8%"><B>Amount</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>capital</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%"><B>of
        Shares</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>stage</B> </TD>
      <TD align=center width="1%" >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="9%"><B>(Deficiency)</B> </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff><B>Balance as of July 1, 2006</B> </TD>
      <TD align=right width="8%" bgColor=#e6efff>63,743,483 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="8%" bgColor=#e6efff>636 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>6,444,214 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>(7,089,080</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
      <TD align=left width="1%"  bgColor=#e6efff>$</TD>
      <TD align=right width="9%" bgColor=#e6efff>(644,230</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Conversion of convertible debenture, net </TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>of issuance costs </TD>
      <TD align=right width="8%" bgColor=#e6efff>203,952,201 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="8%" bgColor=#e6efff>2,040 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>1,785,044 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>1,787,084 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>&nbsp; </TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Classification of a liability in respect
        of warrants to </TD>
      <TD align=left width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>additional paid in capital </TD>
      <TD align=right width="8%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="8%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">359,658 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">359,658 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Classification of deferred issuance expenses to </TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>additional paid in capital </TD>
      <TD align=right width="8%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="8%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>(378,708</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>(378,708</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Classification of a liability in respect
        of options </TD>
      <TD align=left width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>granted to consultants </TD>
      <TD align=right width="8%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="8%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">116,371 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">116,371 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Compensation related to options granted to </TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>employees </TD>
      <TD align=right width="8%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="8%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>1,151,991 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>1,151,991 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Compensation related to options granted to
      </TD>
      <TD align=left width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>consultants </TD>
      <TD align=right width="8%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="8%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">358,155 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">- </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=right width="9%">358,155 </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR>
      <TD bgColor=#e6efff>&nbsp; </TD>
      <TD width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="8%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD width="9%" bgColor=#e6efff>&nbsp; </TD>
      <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left>Exercise of warrants related to the April 3, 2006 </TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="8%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="1%" >&nbsp;</TD>
      <TD align=left width="9%">&nbsp; </TD>
      <TD align=left width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>issuance. </TD>
      <TD align=right width="8%" bgColor=#e6efff>8,108,767 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="8%" bgColor=#e6efff>81 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>608,077 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>608,158 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Receipts on account of stock and warrants
      </TD>
      <TD align=right width="8%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="8%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>4,200,000 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD align=right width="9%" bgColor=#e6efff>4,200,000 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff>Net loss for the period </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>- </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>(4,888,773</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="9%"
    bgColor=#e6efff>(4,888,773</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
    </TR>
    <TR>
      <TD>&nbsp; </TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="8%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="1%" >&nbsp;</TD>
      <TD width="9%">&nbsp; </TD>
      <TD width="1%" >&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD align=left bgColor=#e6efff><B>Balance as of March 31, 2007</B> </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="8%"
    bgColor=#e6efff>275,804,451 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="8%"
    bgColor=#e6efff>2,757 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>10,444,802 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>4,200,000 </TD>
      <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>(11,977,853</TD>
      <TD align=left width="1%"  bgColor=#e6efff>) </TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
      <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="9%"
    bgColor=#e6efff>&nbsp;2,669,706 </TD>
      <TD align=left width="1%"
  bgColor=#e6efff>&nbsp;</TD>
    </TR>
  </TABLE>
</DIV>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  10</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-12></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>CONSOLIDATED STATEMENTS
      OF CASH FLOWS (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Period from</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>May 11, 2001</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>(inception)</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD colspan="4" align=center><B>Nine months ended</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>through</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD colspan="4" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
      31,</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>March 31</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2006</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>CASH FLOWS FROM OPERATING ACTIVITIES:</B>
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Net loss </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">(4,888,773</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;(1,489,748</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;(11,977,853</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Adjustments to reconcile net loss to net cash
      used in operating </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>activities: </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Depreciation and amortization </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>38,732 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>31,528 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>225,301 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Capital gain </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">20,053 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">3,680 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Impairment of know-how </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>264,807 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Amortization of deferred issuance costs </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">168,228 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">104,802 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">593,370 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Stock-based compensation to employees </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,151,991 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,151,991 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Stock-based compensation to consultants </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">358,155 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">48,182 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,539,287 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>In-process research and development write-off
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>246,470 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Know-how licensors &#150; imputed interest </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">18,791 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">54,600 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Salary grant in shares and warrants </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>710,500 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Decrease (increase) in accounts receivable </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(189,861</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">51,014 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(282,096</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Decrease in prepaid expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>5,515 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(17,081</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>33,192 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Increase in trade payables </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">69,718 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,588 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">345,414 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Increase (decrease) in other accounts payable
      and accrued </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,100,139 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(51,245</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,797,808 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Increase in accrued interest due to related
      parties </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>3,450 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Linkage differences and interest on long-term restricted </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>lease deposit </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>50 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(2,164</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Change in fair value of liability in respect of warrants </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(716,214</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(150,000</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(2,539,177</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Amortization of discount and accrued interest
      on </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>convertible debentures </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">161,332 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">161,332 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Accrued severance pay, net </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(2,275</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>7,165 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>17,420 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Net cash used in operating activities </TD>
    <TD align=left width="1%" style="BORDER-BOTTOM: #000000 1px solid">&nbsp;</TD>
    <TD align=right width="12%" style="BORDER-BOTTOM: #000000 1px solid">(1,723,260</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" style="BORDER-BOTTOM: #000000 1px solid">&nbsp;</TD>
    <TD align=right width="12%" style="BORDER-BOTTOM: #000000 1px solid">(1,443,954</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" style="BORDER-BOTTOM: #000000 1px solid">&nbsp;</TD>
    <TD align=right width="12%" style="BORDER-BOTTOM: #000000 1px solid">(7,652,668</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>CASH FLOWS FROM INVESTING ACTIVITIES:</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Acquisition of Pluristem Ltd. (1) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>31,899 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Purchase of property and equipment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(216,438</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(36,006</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(459,210</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Proceed from sale of property and equipment
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>717 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>29,192 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Purchase of long-term restricted lease deposit </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(22,934</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(3,653</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(50,479</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Repayment of long-term restricted lease deposit
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>19,851 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Purchase of know-how </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(100,000</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash used in investing activities </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(238,655</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(39,659</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(528,747</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>CASH FLOWS FROM FINANCING ACTIVITIES:</B>
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Issuance of common stock, net of issuance costs </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">4,686,209 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Issuance of warrants </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,246,397 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Exercise of warrants </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">608,158 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">608,158 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Issuance of convertible debenture </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,734,012 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Issuance expenses related to convertible debentures </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(440,000</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(440,000</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Short-term bank credit, net </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(26</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Receipt on account of stock and warrants </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">4,200,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">4,200,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Repayment of know-how licensors </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(218,750</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(300,000</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Repayment of notes and loan payable to related parties </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(69,885</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Proceeds from notes and loan payable to related
      parties </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>78,195 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Net cash provided by financing activities </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">4,149,408 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">12,743,060 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
</TABLE>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  11</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-13></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>CONSOLIDATED STATEMENTS
      OF CASH FLOWS (UNAUDITED)</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Period from</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>May 11, 2001</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>(inception)</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD colspan="4" align=center><B>Nine months ended</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>through</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD colspan="4" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
      31,</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>March 31</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2006</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Increase (decrease) in cash and cash equivalents
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,187,493 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(1,483,613</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>4,561,645 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Cash and cash equivalents at the beginning of the period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">2,374,152 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">1,889,438 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash and cash equivalents at the end of the
      period </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;4,561,645 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;405,825 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;4,561,645 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Non-cash investing and financing information:</B>
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Classification of liabilities and deferred issuance </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>expenses into equity </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;97,321 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;97,321 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Conversion of convertible debenture </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;2,227,084 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;2,227,084 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>(1) Acquisition of Pluristem Ltd.</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>Fair value of assets acquired and</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>liabilities assumed at the acquisition date:</B>
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Working capital (excluding cash and cash </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>equivalents) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;(427,176</TD>
    <TD align=left width="2%" >) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Long-term restricted lease deposit </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>18,807 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left>Property and equipment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">130,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>In-process research and development write-off
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>246,470 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;(31,899</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
  </TR>
</TABLE>
<P align=center>The accompanying notes are an integral part of the consolidated
  financial statements. <BR>
  12</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-14></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 1: - GENERAL </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">a. </TD>
    <TD> <P align=justify>Pluristem Life Systems Inc. (the &#147;Company&#148;),
        a Nevada Corporation, was incorporated and commenced operations on May
        11, 2001. The Company has a wholly owned subsidiary, Pluristem Ltd. (the
        &#147;subsidiary&#148;) that was incorporated under the laws of Israel
        and began its activity in January 2004.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">b. </TD>
    <TD> <P align=justify>The Company is devoting substantially all of its efforts
        towards conducting research and development of critical cell expansion
        services to cord blood banks. In the course of such activities, the Company
        and its subsidiary have sustained operating losses and expect such losses
        to continue in the foreseeable future. The Company and its subsidiary
        have not generated any revenues or product sales and have not achieved
        profitable operations or positive cash flows from operations. The Company&#146;s
        deficit accumulated during the development stage aggregated to $11,977,853
        through March 31, 2007. There is no assurance that profitable operations,
        if ever achieved, could be sustained on a continuing basis.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The Company plans to continue to finance its operations
        with a combination of stock issuance and private placements and in the
        longer term, revenues from product sales. 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.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>These conditions raise substantial doubt about the Company&#146;s
        ability to continue as a going concern. The consolidated financial statements
        do not include any adjustments that might arise from this uncertainty,
        relating to the recoverability and classification of recorded assets amounts
        or the amounts and classification of liabilities that might be necessary
        should the Company be unable to continue as a going concern.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">c. </TD>
    <TD> <P align=justify>The accompanying unaudited interim consolidated financial
        statements have been prepared as of March 31, 2007, in accordance with
        United States generally accepted accounting principles relating to the
        preparation of financial statements for interim periods. Accordingly,
        they do not include all the information and footnotes required by generally
        accepted accounting principles for complete financial statements. In the
        opinion of management, all adjustments (consisting of normal recurring
        accruals) considered necessary for a fair presentation have been included.
        Operating results for the three-month and nine-month periods ended March
        31, 2007 are not necessarily indicative of the results that may be expected
        for the year ended June 30, 2007.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">d. </TD>
    <TD> <P align=justify>On May 7, 2007, the Company&#146;s shares have begun
        trading on Europe's Frankfurt Stock Exchange, under the symbol PJT.</P></TD>
  </TR>
</TABLE>
<P align=center>13</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-15></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES</B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">a. </TD>
    <TD> <P align=justify>The significant accounting policies followed in the
        preparation of these financial statements are identical to those applied
        in the preparation of the latest annual financial statements except as
        detailed in b below.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">b. </TD>
    <TD> <P align=justify>On July 1, 2006, the Company adopted Statement of Financial
        Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS
        123(R)") which requires the measurement and recognition of compensation
        expense based on estimated fair values for all share-based payment awards
        made to employees and directors. SFAS 123(R) supersedes Accounting Principles
        Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
        25"), for periods beginning in fiscal 2006. In March 2005, the Securities
        and Exchange Commission issued Staff Accounting Bulletin No. 107 ("SAB
        107") relating to SFAS 123(R). The Company has applied the provisions
        of SAB 107 in its adoption of SFAS 123(R).</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>SFAS 123(R) 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 statement. Prior to the adoption
        of SFAS 123(R), the Company accounted for equity-based awards to employees
        and directors using the intrinsic value method in accordance with APB
        25 as allowed under Statement of Financial Accounting Standards No. 123,
        "Accounting for Stock-Based Compensation" ("SFAS 123").</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The Company adopted SFAS 123(R) using the modified prospective
        transition method, which requires the application of the accounting standard
        starting from July 1, 2006, the first day of the Company's fiscal year
        2006. Under that transition method, compensation cost recognized in the
        nine months period ended March 31, 2007, includes: (a) compensation cost
        for all share-based payments granted prior to, but not yet vested as of
        July 1, 2006, based on the grant date fair value estimated in accordance
        with the original provisions of Statement 123, and (b) compensation cost
        for all share-based payments granted subsequent to July 1, 2006, based
        on the grant-date fair value estimated in accordance with the provisions
        of Statement 123(R). Results for prior periods have not been restated.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The Company recognizes compensation expenses for the
        value of its awards, which have graded vesting based on the straight line
        method over the requisite service period of each of the awards.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>As a result of adopting SFAS 123(R) as of July 1, 2006,
        the Company's net income for the nine months ended March 31, 2007, is
        $71,599 lower than if it had continued to account for stock-based compensation
        under APB 25. Basic and diluted net loss per share for the nine months
        ended March 31, 2007, are $0.0004 lower, than if the Company had continued
        to account for share- based compensation under APB 25.</P></TD>
  </TR>
</TABLE>
<P align=center>14</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-16></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">b. </TD>
    <TD> <P align=justify>(Cont.):</P></TD>
  </TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>Prior to July 1, 2006, the Company applied the intrinsic
        value method of accounting for stock options as prescribed by APB 25,
        whereby compensation expense is equal to the excess, if any, of the quoted
        market price of the stock over the exercise price at the grant date of
        the award.</P></TD>
  </TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The Company estimates the fair value of stock options
        granted using the Black-Scholes-Merton option-pricing model. The option-pricing
        model requires a number of assumptions, of which the most significant
        are, expected stock price volatility, and the expected option term. Expected
        volatility was calculated based upon actual historical stock price movements
        over the most recent periods ending on the grant date, equal to the expected
        option term. The expected option term represents the period that the Company's
        stock options are expected to be outstanding and was determined based
        on historical experience of similar options, giving consideration to the
        contractual terms of the stock options. The Company has historically not
        paid dividends and has no foreseeable plans to issue dividends. The risk-free
        interest rate is based on the yield from U.S. Treasury zero-coupon bonds
        with an equivalent term.</P></TD>
  </TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The fair value of the Company's stock options granted
        to employees and directors for the nine months ended March 31, 2007 and
        2006 was estimated using the following weighted average assumptions:</P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center><B>Nine months ended</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
      31,</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="15%"><B>2007</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="15%"><B>2006</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="15%"><B>Unaudited</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="15%">&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%">&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Risk free interest rate </TD>
    <TD align=center width="15%" bgColor=#e6efff>4.3-4.8% </TD>
    <TD align=center width="15%" bgColor=#e6efff>4.2% </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Dividend yields </TD>
    <TD align=center width="15%">0% </TD>
    <TD align=center width="15%">0% </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Volatility </TD>
    <TD align=center width="15%" bgColor=#e6efff>105-124% </TD>
    <TD align=center width="15%" bgColor=#e6efff>105% </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Expected term (in years) </TD>
    <TD align=center width="15%">6 </TD>
    <TD align=center width="15%">6 </TD>
  </TR>
</TABLE>
<P align=center>15</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-17></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">b. </TD>
    <TD> <P align=justify>(Cont.):</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The following table illustrates the effect on net loss
        and net loss per share, assuming that the Company had applied the fair
        value recognition provision of SFAS No. 123 on its stock-based employee
        compensation:</P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Period from</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>May 11, 2001</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Nine months</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Three months</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>(Inception)</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>ended</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>ended</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>through</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>March 31</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>March 31</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>March 31</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2006</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2006</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Net loss available to </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Common stock &#150; as </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Reported </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">1,489,748 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;628,582 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;11,977,853 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Deduct- stock-based </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>employee compensation- </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>intrinsic value </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(26,393</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Add - stock based </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>employee compensation - </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>fair value </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">290,646 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">233,748 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">981,578 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Pro forma net loss </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">1,780,394 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;862,330 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;12,933,038 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Basic and diluted net loss </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>per stock as reported </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;(0.03</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;(0.01</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Basic and diluted pro </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>forma net loss per stock </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;(0.04</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;(0.01</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD>
  </TR>
</TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>For purposes of this pro-forma disclosure,
  the value of the options is estimated using a Black-Scholes option pricing formula
  and amortized to expense over the options vesting period. The assumptions used
  in the calculation are as follows: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="15%"><B>Nine months</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="15%"><B>ended</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="15%"><B>March 31,</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>Employee stock
      options</B> </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="15%"><B>2007</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="15%"><B>Unaudited</B> </TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="15%">&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Expected volatility </TD>
    <TD align=center width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=center width="15%" bgColor=#e6efff>105%-114% </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Risk-free interest </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="15%">4.76% </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Dividend yield </TD>
    <TD align=center width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=center width="15%" bgColor=#e6efff>0% </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Expected life of up to (years) </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="15%">6 </TD>
  </TR>
</TABLE>
<P align=center>16</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-18></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>c. </TD>
    <TD align=left width="90%" >Recently issued accounting pronouncements: </TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>1. </TD>
    <TD align=left width="85%" >FASB Interpretation No. 48: </TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>In July 2006, the FASB issued
        FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes
        an Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies
        the accounting for income taxes by prescribing the minimum recognition
        threshold a tax position is required to meet before being recognized in
        the financial statements. FIN 48 utilizes a two-step approach for evaluating
        tax positions. Recognition (step one) occurs when an enterprise concludes
        that a tax position, based solely on its technical merits, is more-likely-than-not
        to be sustained upon examination. Measurement (step two) is only addressed
        if step one has been satisfied (i.e., the position is more-likely-than-not
        to be sustained). Under step two , the tax benefit is measured as the
        largest amount of benefit, determined on a cumulative probability basis
        that is more-likely-than-not to be realized upon ultimate settlement.
      </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>FIN 48 applies to all tax positions
        related to income taxes subject to the Financial Accounting Standard Board
        Statement No. 109, "Accounting for income taxes" ("FAS 109"). This includes
        tax positions considered to be "routine" as well as those with a high
        degree of uncertainty. </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>FIN 48 has expanded disclosure
        requirements, which include a tabular roll forward of the beginning and
        ending aggregate unrecognized tax benefits as well as specific detail
        related to tax uncertainties for which it is reasonably possible the amount
        of unrecognized tax benefit will significantly increase or decrease within
        twelve months. These disclosures are required at each annual reporting
        period unless a significant change occurs in an interim period. </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>FIN 48 is effective for fiscal
        years beginning after December 15, 2006. The cumulative effect of applying
        FIN 48 will be reported as an adjustment to the opening balance of retained
        earnings. The Company does not expect that the adoption of FIN 48 will
        have a significant impact on the Company's financial position and results
        of operations. </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>2. </TD>
    <TD align=left width="85%" > <P align=justify>SFAS No. 157: </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>In September 2006, the FASB
        issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"). This statement
        provides a single definition of fair value, a framework for measuring
        fair value, and expanded disclosures concerning fair value. Previously,
        different definitions of fair value were contained in various accounting
        pronouncements creating inconsistencies in measurement and disclosures.
        SFAS No. 157 applies under those previously issued pronouncements that
        prescribe fair value as the relevant measure of value, except SFAS No.
        123(R) and related interpretations. The statement does not apply to accounting
        standard that require or permit measurement similar to fair value but
        are not intended to represent fair value. This pronouncement is effective
        for fiscal years beginning after November 15, 2007. The Company is currently
        evaluating the impact of adopting SFAS 157. </P></TD>
  </TR>
</TABLE>
<P align=center>17</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-19></A><STRONG><BR>
</STRONG>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<p><STRONG>NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.) </STRONG></p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">c. </TD>
    <TD> <P align=justify>Recently issued accounting pronouncements (Cont.):</P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>3. </TD>
    <TD align=left width="85%" >SFAS No. 159: </TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" >&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>In February 2007, the FASB issued
        SFAS No. 159, The Fair Value Option for Financial Assets and Financial
        Liabilities. This statement provides companies with an option to report
        selected financial assets and liabilities at fair value. Generally accepted
        accounting principles have required different measurement attributes for
        different assets and liabilities that can create artificial volatility
        in earnings. The Standard&#146;s objective is to reduce both complexity
        in accounting for financial instruments and the volatility in earnings
        caused by measuring related assets and liabilities differently. This Statement
        is effective as of the beginning of an entity&#146;s first fiscal year
        beginning after November 15, 2007. The Company is currently evaluating
        the impact of adopting SFAS 159. </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>4. </TD>
    <TD align=left width="85%" > <P align=justify>Staff Accounting Bulletin No.
        108: </P></TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="85%" > <P align=justify> </P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" ></TD>
    <TD align=left></TD>
    <TD align=left width="85%" > <P align=justify>In September 2006, the SEC issued
        Staff Accounting Bulletin No. 108 ("SAB 108") Considering the Effects
        of Prior Year Misstatements when Quantifying Misstatements in Current
        Year Financial Statements, that provides interpretive guidance on how
        the effects of the carryover or reversal of prior year misstatements should
        be considered in quantifying a current year misstatement. The SEC staff
        believes that registrants should quantify errors using both a balance
        sheet and an income statement approach and evaluate whether either approach
        results in quantifying a misstatement that, when all relevant quantitative
        and qualitative factors are considered, is material. This pronouncement
        is effective for fiscal years ending after November 15, 2006. The Company
        is currently evaluating the provisions of SAB 108. </P></TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">a. </TD>
    <TD> <P align=justify>The Company's authorized common stock consists of 1,400,000,000
        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.
        The common stocks are registered and publicly traded on the Over-the-Counter
        Bulletin Board service of the National Association of Securities Dealers,
        Inc. under the symbol PLRS.OB.</P></TD>
  </TR>
</TABLE>
<P align=center>18</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-20></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">b. </TD>
    <TD> <P align=justify>On July 9, 2001, the Company issued 35,000,000 shares
        of common stock in consideration for $2,500, which was received on July
        27, 2001.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On October 14, 2002, the Company issued 14,133,000 shares
        of common stock at a price of $0.007 per common share in consideration
        for $100,950 before offering costs of $17,359.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">c. </TD>
    <TD> <P align=justify>On March 19, 2003, two directors each returned 13,650,000
        shares of common stock with a par value of $0.01 per share, for cancellation
        for no consideration.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">d. </TD>
    <TD> <P align=justify>On March 27, 2003 the Company's Board of Directors authorized
        a 14:1 split of the common stock. Accordingly, all references to number
        of shares, common stock and per share data in the accompanying financial
        statements have been adjusted to reflect the stock split on a retroactive
        basis.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">e. </TD>
    <TD> <P align=justify>In July 2003, the Company issued an aggregate of 725,483
        units comprised of 725,483 common stock and 1,450,966 warrants to a group
        of investors, for total consideration of $1,235,752 (net of issuance costs
        of $70,110), under a private placement. The consideration was paid partly
        in the year ended June 30, 2003 ($933,464) and the balance was paid in
        the year ended June 30, 2004.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>In this placement each unit was comprised of one common
        stock and two warrants, the first warrant is exercisable for one common
        stock at a price of $2.25 per stock, and may be exercised within one year.
        The second warrant is exercisable for one common stock at a price of $2.70
        per stock, and may be exercised within five years. As of June 30, 2005,
        725,483 warrants were expired unexercised.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">f. </TD>
    <TD> <P align=justify>On January 20, 2004, the Company consummated a private
        equity placement with a group of investors (the "investors"). The Company
        issued 3,000,000 units in consideration for net proceeds of $1,272,790
        (net of issuance costs of $227,210), each unit is comprised of 3,000,000
        common stock and 3,000,000 warrants. Each warrant is exercisable into
        one common stock at a price of $0.75 per stock, and may be exercised until
        January 31, 2007. On March 18, 2004, a registration statement on Form
        SB-2 has been declared affective and the above- mentioned common stocks
        have been registered for trading. 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.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>According to EITF 00-19, "Accounting for derivative
        financial instruments indexed to, and potentially settled in, a Company's
        own stock", the Company classified the warrants as liabilities according
        to their fair value as remeasured at each reporting period until exercised
        or expired. Changes in the fair value of the warrants were reported in
        the statements of operations as financial income or expense.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>The Company allocated the gross amount received of $1.5
        million to the par value of the shares issued ($30) and to the liability
        in respect of the warrants issued ($1,499,970). The amount allocated to
        the liability was less than the fair value of the warrants at grant date.
        On January 31, 2007 all the warrants were expired unexercised.</P></TD>
  </TR>
</TABLE>
<P align=center>19</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-21></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">f. </TD>
    <TD> <P align=justify>(Cont.):</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>In addition, the Company issued 300,000 warrants to
        finders in connection with this private placement, exercisable into 300,000
        common shares at a price of $0.75 per common share until January 31, 2007.
        The fair value of the warrants issued in the amounts of $192,000 was recorded
        as deferred issuance costs and is amortized over a period of 3 years.
        On April 19, 2004, the finders exercised the warrants.</P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">g. </TD>
    <TD> <P align=justify>In October 2004 the Company commenced a private placement
        offering (&#147;the October 2004 Agreement&#148;) according to which it
        issued 8,500,000 units. Each unit is compromised of one common stock and
        one warrant. The warrant is exercisable for one common stock at an exercise
        price of $0.30 per stock, subject to certain adjustments. The units were
        issued as follows:</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>In November 2004, the Company issued according to the
        October 2004 Agreement 3,250,000 units comprised of 3,250,000 common stock
        and 3,250,000 warrants to a group of investors, for total consideration
        of $296,092 (net of cash issuance costs of $28,908), and additional 120,000
        warrants to finders as finders&#146; fee.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>In January 2005 the Company issued according to the
        October 2004 Agreement an additional 4,300,000 units for total consideration
        of $425,025 (net of cash issuance costs of $4,975), and additional 90,000
        warrants were issued to finders as finders&#146; fee.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>In March 2005 the Company issued according to the October
        2004 Agreement additional 750,000 units for total consideration of $68,962
        (net of cash issuance costs of $6,038), and additional 35,000 warrants
        were issued to finders as finders&#146; fee.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>In March 2005 the Company issued, according to the October
        2004 Agreement 200,000 common shares and 200,000 share purchase warrants
        to one investor for total consideration of $20,000 which were paid to
        the Company in May 2005.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On November 30, 2006 , all the warrants were expired
        unexercised.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">h. </TD>
    <TD> <P align=justify>On January 24, 2005 the Company commenced a private
        placement offering (the &#147;January 24, 2005 Agreement&#148;) which
        was closed on March 3, 2005 and issued 12,000,000 units in consideration
        for $1,176,000 (net of cash issuance costs of $24,000). Each unit is compromised
        of one common stock and one warrant. The warrant is exercisable for one
        common stock at a price of $0.30 per stock. On November 30, 2006, all
        the warrants were expired unexercised. Under this agreement the Company
        issued to finders 1,845,000 shares and 475,000 warrants with exercise
        price of $2.5 per stock exercisable until November 2007.</P></TD>
  </TR>
</TABLE>
<P align=center>20</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-22></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">i. </TD>
    <TD> <P align=justify>On January 31, 2005, the Company consummated a private
        equity placement offering (the &#147;January 31, 2005 Agreement&#148;)
        with a group of investors (the "Investors") according to which it issued
        12,000,000 units in consideration for net proceeds of $1,137,000 (net
        of issuance costs of $63,000). Each unit is comprised of one common stock
        and one warrant. Each warrant is exercisable into one common stock at
        a price of $0.30 per stock. If the Registration Statement covering the
        Registrable Securities was not filed as contemplated by 70 days and if
        the Registration Statement covering the Registrable Securities was not
        effective until August 31, 2005, The Company would have paid the Investor
        2% of the purchase price for each 30 day period beyond the applicable
        date until the filing or the registration is completed. The January 31,
        2005 Agreement includes a finder&#146;s fee of a cash amount equal to
        5% of the amount invested ($60,000) and issuance of warrants for number
        of shares equal to 5% of the number of shares that were issued (600,000)
        with an exercise price of $0.1 per stock, subject to certain adjustments,
        exercisable until November 30, 2006.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>According to EITF 00-19, "Accounting for derivative
        financial instruments indexed to, and potentially settled in, a Company's
        own stock", the Company classified the warrants as liabilities according
        to their fair value as remeasured at each reporting period until exercised
        or expired. Changes in the fair value of the warrants will be reported
        in the statements of operations as financial income or expense.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>As of the date of the issuance the Company allocated
        the gross amount received of $1,200,000 to the par value of the shares
        issued ($120) and to the liability in respect of the warrants issued ($1,199,880).
        Issuance expenses in the amount of $63,000 and finders fee in the amount
        of $144,000 were recorded as deferred issuance costs. The amount allocated
        to the liability was less than the fair value of the warrants at grant
        date. On May 13, 2005 the Registration Statement became effective and
        the Company became no longer under possible penalties. As such, the liability
        and the deferred issuance costs related to the agreement has been classified
        to the Stockholders Equity as Additional Paid in Capital. As of May 13,
        2005, the fair value of the liability in respect of the warrants issued
        was $720,000 and the amount of the deferred issuance costs was $178,116.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On November 30, 2006, all the warrants were expired
        unexercised.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">j. </TD>
    <TD> <P align=justify>On March 23, 2005, the Company issued 2,400,000 shares
        of common stock and 2,400,000 options as a bonus to the 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 $696,000 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 &#150; Scholes
        valuation model. On November 30, 2006, all the warrants were expired unexercised.</P></TD>
  </TR>
</TABLE>
<P align=center>21</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-23></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">k. </TD>
    <TD> <P align=justify>On February 11, 2004, the Company issued an aggregate
        amount of 1,000,000 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 $800,000 and was recorded as an operating
        expense in the statement of operations in the year ended June 30, 2004.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">l. </TD>
    <TD> <P align=justify>On November 28, 2005, 80,000 warrants, which were issued
        to finders as finder fees in related to the &#147;January 24, 2005 Agreement&#148;,
        were exercised to shares.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">m. </TD>
    <TD> <P align=justify>On January 25, 2006, 10,000 warrants, which were issued
        to finders as finder fees in related to the &#147;January 24, 2005 Agreement&#148;,
        were exercised to 25shares.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">n. </TD>
    <TD> <P align=justify>Till November 9, 2006 all of the convertible debentures,
        which were issued on April 3, 2006, were converted into 193,952,201 shares.
        As a result an amount of $ 1,787,084 was reclassified into common stock
        and additional paid-in capital as follow: from conversion of the feature
        embedded in convertible debenture ($1,951,466), convertible debenture
        ($201,974), accrued interest ($73,644) net of issuance expenses in the
        amount of $440,000. In addition, the warrants and options to consultants
        in the amount of $476,029 and deferred issuance expenses in the amount
        of $378,708 were reclassified as equity.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>Pursuant to an investor relation agreements dated April
        28, 2006 and August 2006 the Company paid in cash an amount of $ 440,000
        on October 19, 2006 and issued 10,000,000 common shares on November 9,
        2006 to certain service providers following reaching certain milestones
        regarding the conversion of the Convertible Debenture as agreed to by
        the parties.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">o. </TD>
    <TD> <P align=justify>During the nine months ended March 31, 2007 8,108,767
        of the warrants which were issued on April 3, 2006, were exercised into
        shares in consideration for $ 608,158.</P></TD>
  </TR>
</TABLE>
<P align=center>22</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-24></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">p. </TD>
    <TD> <P align=justify><B>Options to employees and consultants:</B></P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On September 18, 2006 the Company approved allocation
        of an additional 15,000,000 of it common stock for the 2005 plan.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On January 24, 2007 the Company reserved additional
        250,000,000 of it common stock for the 2005 plan.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>Options to employees:</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On October 30, 2006 the Board of Directors decided to
        reduce the exercise price of the options that were granted to the Company's
        employees and directors from $ 0.1 to $ 0.022. According to SFAS 123(R)
        modifications are treated as an exchange of the original award, resulting
        in additional compensation expenses based on the differences between the
        fair value of the new award and the original award immediately before
        modification. The incremental expenses should be expensed over the remaining
        vesting period. </P>
      <P align=justify>As a result, the Company recognized compensation expenses
        of $46,196 immediately for the options that were already fully vested
        and the remaining compensation expenses amounted to $7,632 will be expense
        through the remaining vesting period of the options. The fair value for
        these options was estimated using Black-Scholes option-pricing model.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On September 18, 2006 and October 30, 2006 the Board
        of Directors approved to grant to two officers 8,500,000 stock options
        exercisable at a price of $0.022 per share. The options have a two years
        vesting period with six months grace period (i.e. vesting equally monthly
        during the remaining 18 months). The fair value for these options at the
        grant date was $140,678.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On November 9, 2006 and December 27, 2006 the Company
        granted 6,840,000 options exercisable at a price of $0.019-$0.022 per
        share to the Company&#146;s employees and directors under the 2005 Plan.
        The fair value for these options at the grant date was $113,829.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On January 24, 2007 the Company granted 203,000,000
        options exercisable at a price of $0.0175 per share to the Company&#146;s
        employees and directors under the 2005 Plan. The fair value for these
        options at the grant date was $3,060,830.</P></TD>
  </TR>
</TABLE>
<P align=center>23</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-25></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<DIV>
  <TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
    <TR vAlign=top>
      <TD width="5%" >&nbsp;</TD>
      <TD align=left>p. </TD>
      <TD align=left width="90%"><B>Options to employees and consultants (Cont.):</B>
      </TD>
    </TR>
    <TR vAlign=top>
      <TD width="5%">&nbsp;</TD>
      <TD align=left>&nbsp; </TD>
      <TD align=left width="90%">Options to employees (Cont.): </TD>
    </TR>
    <TR>
      <TD width="5%">&nbsp;</TD>
      <TD>&nbsp; </TD>
      <TD align=left width="90%">&nbsp;</TD>
    </TR>
    <TR vAlign=top>
      <TD width="5%"></TD>
      <TD align=left></TD>
      <TD align=left width="90%"><B>A summary of the Company&#146;s share option
        activity (except options to consultants) under the Plans is as follows:
        </B></TD>
    </TR>
  </TABLE>
</DIV>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD colspan="10" align=center style="BORDER-BOTTOM: #000000 1px solid"> <B>Nine
      months ended March 31,</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD colspan="10" align=center style="BORDER-BOTTOM: #000000 1px solid"> <B>2007</B>
    </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>Weighted</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>average</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>Weighted</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>remaining</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>Aggregate</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>Average</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>contractual</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>intrinsic</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>Exercise</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>terms</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><B>value</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Number</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Price</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>(in years)</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>price</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%">&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Options outstanding </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>at beginning of year </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>15,155,790 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.032 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Options granted </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">218,340,000 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="12%">&nbsp;0.0176</TD>
    <TD align=left width="2%">(*) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Options exercised </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Options forfeited </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(125,003</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;0.022 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%">&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Options outstanding </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>at end of the period </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>233,370,787 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;0.0185 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>9.71 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>26,448,059 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%">&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Options exercisable at </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>the end of the period </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">10,897,456 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;0.036 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%">8.06
    </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%">$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">1,047,570 </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%">&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left>Options vested and </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>expected to vest </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>233,370,787 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;0.0185 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>9.71 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>26,448,059 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
  </TR>
</TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>(*)&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;During
  October 2006, the Company re-priced the exercise price for certain grants to
  employee and directors. The re-pricing was accounted for in accordance with
  SFAS 123R, by applying modification accounting. According to SFAS 123(R) modifications
  are treated as an exchange of the original award, resulting in additional compensation
  expenses based on the differences between the fair value of the new award and
  the original award immediately before modification. Applying modification accounting,
  resulted in additional compensation expenses for the nine months ended March
  31, 2007, that amounted to $ 49,542. </P>
<P style="MARGIN-LEFT: 10%" align=justify>Intrinsic value of exercisable options
  (the difference between the Company's closing stock price on the last trading
  day in fiscal 2006 and the exercise price, multiplied by the number of in-the-money
  options) represents the amount that would have been received by the employees
  and directors option holders had all option holders exercised their options
  on March 31, 2007. This amount changes based on the fair market value of the
  Company's stock </P>
<P align=center>24</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-26></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="5%"  >p.</TD>
    <TD align=left width="89%"><B>Options to employees and consultants (Cont.):
      </B></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="5%"  >&nbsp;</TD>
    <TD align=left width="89%">Options to employees (Cont.): </TD>
  </TR>
  <TR>
    <TD >&nbsp;</TD>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="89%">&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left ></TD>
    <TD align=left width="5%"  ></TD>
    <TD align=left width="89%"> <P align=justify><B>The Company's outstanding
        options to employees as of March 31, 2007, have been </B><B>separated
        into ranges of exercise prices as follows: </B></P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="9%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>Weighted </B></TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>Exercise </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>average </B></TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=center width="11%"><B>Options for </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>Price </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%">&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>remaining </B></TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=center width="11%"><B>Ordinary </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>per </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>Options </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><B>contractual </B></TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center><B>Issuance date
      </B></TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>Shares </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>Share </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>Exercisable </B></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="11%"><B>terms </B></TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>January 2003- June 2005 </TD>
    <TD align=left width="1%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>3,565,790 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="11%" bgColor=#e6efff>&nbsp;0.022-0.12 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>3,565,790 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>6.33 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left>January 2006 </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=right width="11%">11,464,997 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;0.022 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">6,706,666 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">8.84 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>September 2006 - October </TD>
    <TD align=left width="1%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>8,500,000 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="11%" bgColor=#e6efff>&nbsp;0.022 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>625,000 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>9.55 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left>2006 </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>November 2006 - </TD>
    <TD align=left width="1%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left>December 2006 </TD>
    <TD align=left width="1%"  >&nbsp;</TD>
    <TD align=right width="11%">6,840,000 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;0.019-0.022 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">9.75 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="9%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>January 2007 </TD>
    <TD align=left width="1%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>203,000,000 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="11%" bgColor=#e6efff>&nbsp;0.0175 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>9.82 </TD>
    <TD align=left width="1%"
  bgColor=#e6efff>&nbsp;</TD>
  </TR>
</TABLE>
<P style="MARGIN-LEFT: 10%" align=justify><B>Compensation expenses related to
  options granted to employees were recorded to research and development expenses
  and general and administrative expenses, as follows: </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Period from </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>inception </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD colspan="4" align=center><B>Nine months ended </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>through </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD colspan="4" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
      31, </B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>March 31, </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007 </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2006 </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007 </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Research and development expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;284,055 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;284,055 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>General and administrative expenses </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">867,936 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">867,936 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;1,151,991 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;1,151,991 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
</TABLE>
<P align=center>25</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-27></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="5%"  >p.</TD>
    <TD align=left width="89%"><B>Options to employees and consultants (Cont.):</B>
    </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="5%"  >&nbsp;</TD>
    <TD align=left width="89%">Options to consultants: </TD>
  </TR>
  <TR>
    <TD >&nbsp;</TD>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="89%">&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left ></TD>
    <TD align=left width="5%"  ></TD>
    <TD align=left width="89%"> <P align=justify>On October 30, 2006 the Board
        of Directors decided to reduce the exercise price of the options that
        were granted to the Company's consultants from $ 0.1 to $ 0.022. According
        to SFAS 123(R) modifications are treated as an exchange of the original
        award, resulting in additional compensation based on the differences between
        the fair value of the new award and the original award immediately before
        modification in the amount of $8,335. The incremental expenses in the
        amount of $1,838 should be expensed over the remaining vesting period.
      </P>
      <P align=justify>On October 30, 2006 the Company granted 750,000 options
        to consultant under the 2005 Plan. The grant date fair value for these
        options amounts to $14,240. On December 27, 2006 the Company granted 1,000,000
        options to consultant under the 2005 plan. The grant date fair value for
        these options amounts to $19,264. </P></TD>
  </TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="5%" >&nbsp;</TD>
    <TD align=left width="89%" > <P align=justify>&nbsp;</P></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left ></TD>
    <TD align=left width="5%"  ></TD>
    <TD align=left width="89%"> <P align=justify>On January 24, 2007 the Company
        granted 10,500,000 options exercisable at a price of $0.0175 per share
        to the Company&#146;s consultants under the 2005 Plan. The fair value
        for these options at the grant date was $171,456. </P>
      <P align=justify>The Company accounted for its options to consultants under
        the fair value method in accordance of SFAS 123 and EITF 96-18. The fair
        value for these options was estimated using Black-Scholes option-pricing
        model with the following weighted-average assumptions: risk-free interest
        rates of 4.56- 4.72%, expected dividend yield of 0%, expected volatility
        of 114%-129%, and a weighted-average contractual life of the warrants
        of up to 10 years. Compensation expenses of $358,155 were recognized during
        the nine months period ended March 31, 2007, in respect with those options.
      </P></TD>
  </TR>
  <TR>
    <TD >&nbsp;</TD>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="89%"> <P align=justify></P></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left ></TD>
    <TD align=left width="5%"  ></TD>
    <TD align=left width="89%"> <P align=justify><B>A summary of the Company&#146;s
        share option activity related to options to</B> <B>consultants under the
        Plans is as follows:</B> </P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD colspan="10" align=center style="BORDER-BOTTOM: #000000 1px solid"> <B>Nine
      months ended March 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD colspan="10" align=center style="BORDER-BOTTOM: #000000 1px solid"> <B>2007</B>
    </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Weighted</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>average</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Weighted</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>remaining</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Aggregate</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Average</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>contractual</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>intrinsic</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Exercise</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>terms</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>value</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Number</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Price</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>(in years)</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>price</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Options outstanding </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>at beginning of year </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,669,189 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.067 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Options granted </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">12,250,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.018 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Options exercised </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Options forfeited </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(100,000</TD>
    <TD align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;0.1 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Options outstanding </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>at end of the period </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>13,819,189 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;0.023 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>9.26 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>1,546,485 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Options exercisable at </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>the end of the period </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">1,819,194 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;0.055 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%">5.81
    </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="12%">&nbsp;177,436 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Options vested and </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>expected to vest </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>13,819,189 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;0.023 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>9.26 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>1,546,485 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD>
  </TR>
</TABLE>
<P align=center>26</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-28></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 3: - SHARE CAPITAL AND STOCK OPTIONS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">p. </TD>
    <TD> <P align=justify><B>Options to employees and consultants (Cont):</B></P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>Options to consultants (Cont.):</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify><B>The Company's outstanding options to consultants
        as of March 31, 2007, have been separated into ranges of exercise prices
        as follows:</B></P></TD>
  </TR>
</TABLE>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Exercise </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="14%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=center width="12%"><B>Options for </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Price </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="14%"><B>Weighted average </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=center width="12%"><B>Ordinary </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>per </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><B>Options </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="14%"><B>remaining </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>Issuance date </B></TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Shares </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Share </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>Exercisable </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="14%"><B>contractual terms </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="2%"  >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=center width="14%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>December 31, 2003 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>169,189 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.4 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>169,189 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="14%" bgColor=#e6efff>6.09 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>November 10, 2005 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=right width="12%">150,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.022 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">150,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="14%">1.62 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>January 17, 2006 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,250,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.022 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>750,005 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="14%" bgColor=#e6efff>8.84 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>October 30,2006 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=right width="12%">750,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.022 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">750,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="14%">3.55 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>December 27,2006 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,000,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.019 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="14%" bgColor=#e6efff>9.75 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>January 24, 2007 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=right width="12%">10,500,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;0.0175 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="14%">9.82 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
</TABLE>
<P style="MARGIN-LEFT: 10%" align=justify><B>Compensation expenses related to
  options granted to consultants were recorded to research and development expenses,
  as follows: </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD colspan="4" align=center><B>Nine months ended </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="16%" ><B>Period from inception </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD colspan="4" align=center style="BORDER-BOTTOM: #000000 1px solid"><B>March
      31, </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="16%"
    ><B>through March 31, </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2007 </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="12%"><B>2006 </B></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="16%"
    ><B>2007 </B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
  </TR>
  <TR>
    <TD width="10%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="16%" >&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Research and development expenses </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;358,155 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>48,182 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="16%"
    bgColor=#e6efff >&nbsp;1,539,287 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 4: SUBSEQUENT EVENTS </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">a. </TD>
    <TD> <P align=justify>On May 15, 2007, the Company consummated a private equity
        placement with a group of investors (the &#147;investors&#148;) for a
        straight equity investment. The investors shall invest a minimum of $7,000,000
        and up to a maximum of $13,500,000 for shares of the Company's common
        stock, $.00001 par value at a per share price of $0.0125, and warrant
        to purchase shares at an exercise price of $0.025 exercisable until five
        years after the closing date of the agreement.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>As of May 21, 2007 the Company received $6,875,000 from
        the investors and issued 550,000,000 shares of the Company&#146;s common
        stock and issued 550,000,000 warrants to purchase the Company common stock.
        During the three months ended March 31, 2007 the Company received $ 4,200,000
        on account of the shares and warrants.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On January 26, 2007, the Company issued 66,000,000 warrants
        to finders as finders&#146; fee in connection with introducing the Company
        to the investors. The warrants are exercisable for five years at an exercise
        price of $0.0125. The fair value for these warrants at the grant date
        was $1,157,054.</P></TD>
  </TR>
</TABLE>
<P align=center>27</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_F-29></A> <BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=right><B>PLURISTEM LIFE SYSTEMS INC. AND ITS SUBSIDIARY</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(A Development Stage Company) </TD>
  </TR>
  <TR vAlign=top>
    <TD align=right>(Previous Name - A. I. SOFTWARE INC.) </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
  </TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><B>NOTES TO CONSOLIDATED
      FINANCIAL STATEMENTS</B> </TD>
  </TR>
  <TR vAlign=top>
    <TD align=left><B>In U.S. Dollars</B> </TD>
  </TR>
</TABLE>
<P align=justify><B>NOTE 4: SUBSEQUENT EVENTS (CONT.) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">b. </TD>
    <TD> <P align=justify>On February 21, 2007, the Company has entered into a
        Letter of Intent with Stem Cell Innovation INC (&#147;Stem Cell&#148;),
        according to which, Stem Cell will license from the Company&#146;s subsidiary
        certain marketing rights of the PLX I product in Asia, excluding Japan
        and 3-D stem cell expansion capability in exchange for an upfront license
        fee of 23,000,000 shares and certain milestone payments, royalties and
        other payments. In addition, the Company shall issue to Stem Cell 66,000,000
        shares of common stock and a five year non-callable warrant to buy 66,000,000
        shares at an exercise price of $ 0.03 per share. In exchange, Stem Cell
        shall issue to the Company 27,000,000 shares. The Letter of Intent was
        valid until April 10, 2007. Currently the Company is in negotiation with
        Stem Cell for the closing of the share swap and license agreement.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">c. </TD>
    <TD> <P align=justify>On May 5, 2003, the Company entered into a license agreement
        (&#147;License Agreement&#148;) with the Weizmann Institute of Science,
        the Technion-Israel Institute of Technology, Shai Marezki and other individual
        to acquire an exclusive license for an innovative stem cell production
        technology. Under the License Agreement, the Company has paid $400,000
        and committed to pay royalties based on its future sales or rights distribution
        transactions. Also, the licensors of the License Agreement had an option
        to assign all of their patent rights in the License Agreement to the Company
        in exchange for an aggregate of 5% of the fully diluted share capital
        of the Company. This option may only be exercised within a 60-day period
        commencing from the date when the Company notifies the licensors that
        the market capital of the Company has exceeded $25,000,000. The option
        will expire if it is not exercised within this period. On February 26,
        2007 and on March 26, 2007 the Company has sent notification to the Licensors
        that the market capital of the Company has exceeded $25,000,000. The Company
        accounted for this obligation under EITF 96-18 and accordingly recorded
        approximately $2 million as research and development expenses.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On May 15, 2007, the Company entered into an Assignment
        Agreement with the Weizmann Institute of Science, the Technion-Israel
        Institute of Technology, Shai Marezki (Chief Technology Officer of the
        Company and a shareholder) and other individual (&#147;Assignors&#148;)
        to acquire the technology for an innovative stem cell production and the
        Patent as defined in the exclusive licenses agreement from May 1, 2003.
        According to the Assignment Agreement, the Assignors have agreed to assign
        their rights in the Patent in consideration for approximately $2 million
        (5% of the Company&#146;s value at the assign day). Shai Marezki&#146;s
        share amounted to $367,969. Moreover, the License Agreement shall be terminated
        and the Company is released from any obligation to pay to the Assignors
        any future royalties.</P></TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD> <P align=justify>On the same date, certain Assignors entered into an
        investment agreement with the Company for an amount of $794,562 on the
        same terms which were determined in the equity investment (see on note
        3 q).</P></TD>
  </TR>
</TABLE>
<P align=center>#&nbsp;&nbsp; &nbsp;#&nbsp;&nbsp; &nbsp;#&nbsp;&nbsp; &nbsp;#</P>
<P align=center>28</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_3></A>
<P align=justify><B>Item 2. Management's Discussion and Analysis or Plan of
Operation. </B></P>
<P align=center><B>FORWARD LOOKING STATEMENTS </B></P>
<P align=justify>This quarterly report contains forward-looking statements as
that term is defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our company's or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. </P>
<P align=justify>Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results. </P>
<P align=justify>Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles. </P>
<P align=justify>In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
"common shares" refer to the common shares in our capital stock. </P>
<P align=justify>As used in this quarterly report, the terms "we", "us", "our",
and "Pluristem" mean Pluristem Life Systems, Inc. and our wholly owned
subsidiary, unless otherwise indicated. </P>
<P align=justify><I>Corporate History </I></P>
<P align=justify>We are engaged in the business of the development of the
Mesenchymal and stem cell production technology and the commercialisation of
cell therapy products. We were incorporated in the State of Nevada under the
name &#147;A.I. Software, Inc.&#148; on May 11, 2001. Beginning in July 2001, we were
engaged in software development. Our initial business plan at the time of our
incorporation was premised on the use of artificial intelligence in computer
programming technology and in many areas of the computer, Internet, robotics,
and games industries. On July 1, 2001 we entered into a software development
agreement with Empire Group, a software development firm, to develop for us the
software algorithm program for an artificial intelligence software called
&#147;Randomix.&#148; We were not successful in fully implementing our initial business
plan in regards to our Randomix software. As a result, during March and April of
2003, our Board of Directors conducted an in-depth analysis of our business plan
and related future prospects for software development companies. To better
protect stockholder interests and provide future appreciation, it was decided to
concurrently pursue initiatives in the biotech industry as an extension to our
business. </P>
<P align=justify>On May 5, 2003, we entered into a license agreement with the
Weizmann Institute of Science and the Technion-Israel Institute of Technology
and other individuals to acquire an exclusive license for an innovative stem
cell production technology. This technology, if fully developed, will offer
novel solutions to make procedures like bone marrow transplants and other
methods of cell therapy more accessible to patients suffering from leukemia,
lymphoma, myaloma and a broad range of complicated diseases and disorders. Under
this license agreement, we have paid $400,000 cash and we are obligated to pay
royalties on our future sales and product or rights distribution transactions.
Also, the licensors of the license agreement have an option to assign all of
their patent rights in the license agreement to our company in exchange for an
aggregate of 5% of all of the issued and outstanding share capital of our
company. This option may only be exercised within a 60-day period commencing
from the date when we notify the licensors that the market capital of our
company has exceeded $25,000,000. The option will expire if it is not exercised
within this period. On February 26, 2007 and on March 26, 2007 we have sent
notification to Licensors that the market capital of our company has exceeded
$25,000,000. On May 15, 2007, we entered into an Assignment Agreement with those
licensors to acquire the technology and the Patent as defined in the licenses
agreement from May 1, 2003. According to the Assignment Agreement, the Assignors
have agreed to assign its rights in the Patent in consideration of $1,962,500.
Moreover, the License Agreement shall be terminated and we are </P>
<P align=center>3 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_4></A>
<P align=justify>released from any obligation to pay to the Assignors any future
royalties. On the same date, the Assignors entered into an investment agreement
with us for an amount of $794,562 on the same terms which were determined in the
equity investment dated May 15, 2007. </P>
<P align=justify>To enable us to conduct further research and development of the
exclusive license for the stem cell production technology we acquired from the
Weizmann Institute of Science and the Technion-Israel Institute of Technology,
on June 10, 2003, 100% of the issued and outstanding shares of a research and
development company based in Israel called Pluristem, Ltd. Pluristem, Ltd. was
incorporated under the law of Israel on January 22, 2003 and has the facilities
and personnel to conduct research and development in the field of stem cell
research. As consideration for the shares of Pluristem, Ltd., we paid to the
shareholder of Pluristem, Ltd. cash in the amount of $1,000 and provided
Pluristem, Ltd. with a line of credit in the amount of $500,000. Accordingly,
Pluristem, Ltd. became our wholly-owned subsidiary as of June 10, 2003.</P>
<P align=justify>On June 25, 2003, we changed our name from &#147;A.I. Software,
Inc.&#148; to &#147;Pluristem Life Systems, Inc.&#148; The name change was effected with the
Nevada Secretary of State on June 25, 2003 and took effect with the OTCBB at the
opening of trading on June 30, 2003 under our new stock symbol &#147;PLRS.OB&#148;. From
May 2003 until March 2006, our business has focussed on the development of the
stem cell production technology that we license. Originally, our plan was to
develop that technology to the point where we could sub-license it to medical
scientists and practitioners for their use in producing cell therapy products
for their own use for sale in the marketplace. On March 6, 2006, we announced
that our company was taking a new direction. Now, instead of looking to
sub-lease the stem cell production technology, we will focus on developing the
technology with the goal of producing cell therapy products for sale in the
marketplace.</P>
<P align=justify>On July 5, 2006, we announced that our subsidiary, Pluristem
Ltd., achieved a breakthrough in our Preclinical Study of Bone Marrow
Transplants: engrafted cells increased 2-4 times using Pluristem Ltd.'s
innovative adjuvant cell therapy product known as PLX-I. PLX-I, by adding
mesenchymal stromal cells during bone marrow transplant procedures that use
umbilical cord blood samples, is intended to offer a breakthrough solution to
improved engraftment of blood-producing hematopoeitic stem cells. </P>
<P align=justify>On February 21, 2007, we entered into a Letter of Intent with
Stem Cell Innovation INC (&#147;Stem Cell&#148;) According to which, Stem Cell will
license from our subsidiary certain marketing rights of the PLX I product in
Asia, excluding Japan and 3-D stem cell expansion capability in exchange for an
upfront license fee of 23,000,000 shares and some milestone payments, royalties
and other payments. In addition, we shall issue to Stem Cell 66,000,000 shares
of common stock and a five year non-callable warrant to buy 66,000,000 shares at
an exercise price of $ 0.03 per share. In exchange, Stem Cell shall issue to us
27,000,000 shares. The Letter of Intent was valid until April 10, 2007.
Currently we are in negotiation with Stem Cell for the closing of the share swap
and license agreement. </P>
<P align=justify>On May 7, 2007, our shares have begun trading on Europe's
Frankfurt Stock Exchange, under the symbol PJT. </P>
<P align=justify><I>Our Current Business </I></P>
<P align=justify>We are engaged in the business of the development of the stem
cell production technology and the commercialisation of cell therapy products.
We aim to become a leader in the production of stem cell based therapeutic
products to improve the engraftment of hematopoietic stem cells in bone marrow
transplants and growth or expansion of hematopoietic stem cells outside of the
human body. Stem cells are unspecialised cells that can renew themselves for
long periods through cell division. Scientists have developed sufficient
fundamental understanding to use stem cells for cell therapy and bone marrow
transplants for the potential treatment of a broad range of complicated
diseases. Cell therapy is the use of living cells in the treatment of medical
disorders. Cell therapy is still in its beginning stages of research and
development and only a few potential products are already in clinical studies.
</P>
<P align=justify>We plan to specialize initially in the production of stem cell
based therapeutic products to improve the engraftment of hematopoietic stem
cells in bone marrow transplants and expansion hematopoietic stem cells found in
umbilical cord blood, using the technology platform we license pursuant to our
agreement with the Weizmann Institute of Science and the Technion-Israel
Institute of Technology. We intend to improve this technology platform and
develop it into a functional stem cell production system for the treatment of
severe blood disorders. The first product targets a critical global shortfall of
matched tissue for bone marrow transplantation. Pluristem Ltd started initial
pre-clinical trials on mice that have insufficient immune systems so as to
simulate human blood and immune systems (SCID mice) on PLX I &#150; our first cell
therapy product. PLX I is developed as an Allogeneic product and is based on
supplementing the umbilical cord blood cells with supportive cells that will
improve the effectiveness of </P>
<P align=center>4 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_5></A>
<P align=justify>engraftments, shortening recovery time. The initial published
animal study results show that sufficient engraftment is possible with the
limited number of hemopoietic stem cells available in a single portion of
umbilical cord blood. This paves the way towards using umbilical cord blood for
cell engraftment instead of bone marrow transplants for adult patients. </P>
<P align=justify>We intend to test our first product in clinical trials to gain
Federal Drug Administration approval. </P>
<P align=justify><B>Brief Introduction on Stem Cell Research and Cell Therapy
</B></P>
<P align=justify>Since 1998, when embryonic human stem cells were first
isolated, research on stem cells has received much public attention. Stem cells
have two important characteristics that distinguish them from other types of
cells. First, they are unspecialised cells that renew themselves for long
periods through cell division. Second, under certain physiologic or experimental
conditions, stem cells can be induced to become cells with special functions,
such as the beating cells of the heart muscle or the insulin-producing cells of
the pancreas. Scientists primarily work with two kinds of stem cells from
humans: embryonic stem cells and adult stem cells, which have different
functions and characteristics. In some adult tissues, such as bone marrow,
muscle, and brain, discrete populations of adult stem cells generate
replacements for cells that are lost through normal wear and tear, injury, or
disease. Cell therapy is the use of living cells in the treatment of medical
disorders. Stem cells, progenitors and differentiated functional cells of
various tissues are evolving as potential treatment modality for life
threatening diseases and major clinical indications lacking effective cures.
Cell therapy is still in its beginning stages of research and development and
only a few potential products are already in clinical studies.</P>
<P align=justify>Even though we have the capability to work with embryonic stem
cells, we have chosen to concentrate our efforts on hematopoietic stem cells.
Hematopoietic stem cells can be found in every adult's bone marrow, which is the
spongy tissue found in the cavities of our bones. Hematopoietic stem cells are
the precursors of the various types of blood cells in the human body. These
cells include: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>White cells that fight infections and inflammations (leukocytes) and form
  the basis of the immune system (lymphocytes);
  <LI>Red cells that carry oxygen through our bodies (erythrocytes); and
  <LI>Platelets that help blood to clot. </LI></UL>
<P align=justify>Scientists have developed sufficient understanding to actually
use hematopoietic stem cells for therapy, such as through the procedure of bone
marrow transplant. Thus, this class of human stem cell holds the promise of
being able to repair or replace cells or tissues that are damaged or destroyed
by many of our most devastating diseases and disabilities. Furthermore, bone
marrow transplants are ultimate treatments in many pathological disorders,
including: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>Malignant blood system diseases, such as leukemia, lymphoma and myaloma,
  <LI>Diseases characterized by the lack of, or defective, production of bone
  marrow, such as aplastic anemia,
  <LI>Severe combined immune deficiency,
  <LI>Non-hematopoietic malignancies (solid tumors), or bone marrow disorders,
  following chemotherapy and radiation, and
  <LI>Metabolic diseases or congenital hemoglobinopathies, such as thalessemia.
  </LI></UL>
<P align=justify>For stem cell transplants to succeed, the donated stem cells
must repopulate and/or engraft the recipient's bone marrow, where they will
provide a new source of essential blood and immune system cells. Within the
hematopoietic cell system, only a special type of stem cells called pluripotent
hematopoietic stem cells have extensive capacities to expand, differentiate and
self-renew. Accordingly, pluripotent hematopoietic stem cells are exclusively
required for repopulation and engraftment of donated stem cells following
transplantation. In spite of the key role of pluripotent hematopoietic stem
cells in maintaining the hematopoietic cell system, they appear in extremely low
frequency in the bone marrow tissue. The current technology limitation on
maintaining or expanding undifferentiated stem cells outside of human body is a
major drawback to essential clinical applications of these cells. This current
unavailability of technology to expand the number of stem cells outside of human
body reflects the need for novel stem cell regulators. However, in spite of all
the challenges involved in hematopoietic stem cell transplants, physicians are
now trying, sometimes successfully, to assist in hematopoietic and immune system
recovery following high-dose chemotherapy and/or radiation therapy.</P>
<P align=center>5 </P>
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<P align=justify><B>Brief Introduction on Bone Marrow Transplants </B></P>
<P align=justify>Bone marrow transplantation is a relatively new medical
procedure being used to treat diseases once thought incurable. Since its first
successful use in 1968, bone marrow transplants have been used to treat patients
diagnosed with leukemia, aplastic anemia, lymphomas such as Hodgkin's disease,
multiple myeloma, immune deficiency disorders and some solid tumors such as
breast and ovarian cancer. The bone marrow transplant procedure generally
involves three phases. In the first phase, lasting 5 to 14 days, the bone marrow
recipient is prepared for the graft. Immunosuppressive and cytotoxic
chemotherapy administered with or without irradiation are used to enable the
recipient to accept the graft, to prevent graft rejection, and in cases of acute
leukemia, to eliminate residual leukemia. In the second phase, bone marrow is
procured from a compatible donor and intravenously administered to the graft
recipient. The third phase is a period of waiting for the bone marrow to engraft
and function normally in the recipient. During the time required for engraftment
(approximately 2 to 4 weeks), the graft recipient is vulnerable to infection,
bleeding, severe weight loss, rejection of the graft and graft-versus-host
disease. Graft-versus-host disease occurs in approximately 50% of bone marrow
transplant patients. If the marrow engrafts and the patient survives the
immediate post-transplant period (first 3 to 6 weeks), the patient faces another
set of complications, including graft-versus-host disease and interstitial
pneumonia. Interstitial pneumonia occurs in 60% of bone marrow transplant
patients, typically 4 to 6 weeks post transplant. The disease progresses rapidly
and is fatal in approximately 50% of the cases. 50%-60% of patients survive
where the bone marrow transplant is made during disease remission, and only
10%-25% survive in cases where the bone marrow transplant is done outside of
remission. (Source: The Cost Effectiveness of BMT Therapy and Its Policy
Implications, School of Public Health, UCLA).</P>
<P align=justify>There are several types of bone marrow transplants. They are
distinguished according to the source of the stem cells. An autologus bone
marrow transplant means the transplant stem cells come from the patient. An
allogenic bone marrow transplant means the stem cells come from a donor. A
syngeneic bone marrow transplant means the stem cells come from an identical
twin. </P>
<P align=justify>Research and clinical work in the field of bone marrow
transplants is presently limited due to: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>The average number of active pluripotent hematopoietic stem cells in any
  given bone marrow is extremely low, less than 0.5% of total mononuclear cells;

  <LI>The difficulties of the human body to accept bone marrow transplants from
  donors, and the ensuing damaging reactions;
  <LI>The patient is quite prone to infections following radiation and/or
  chemotherapy treatments, and may have been infected even prior to the
  transplant;
  <LI>Sorting of healthy cells from cancerous cells has not proven 100%
  successful;
  <LI>The great complications in storing and enriching these cells in the
  absence of <I>in vitro</I> differentiation;
  <LI>The absence of a large-scale and sustainable model that enables the
  testing of the ability of hematopoietic stem cells to renew the hematopoietic
  cell system; and
  <LI>There are some clinical situations where autologus bone marrow after tumor
  purging provides insufficient numbers of hematopoietic stem cells for the bone
  marrow transplant. </LI></UL>
<P align=justify>Transplantation experts believe that the ideal approach to a
successful stem cell transplant is to use a large number of stem cells to
maximize the probability of bone marrow repopulation and minimize the time
needed for the return of normal numbers of hematopoietic and immune cells in the
patient.</P>
<P align=justify>One of the major efforts in developing hematopoietic stem cell
technologies has been to identify new and better sources for stem cells. The
majority of transplantable hematopoietic stem cells in adults currently come
primarily from peripheral blood or adult donor bone marrow. Another important
and attainable source of transplantable and lasting hematopoietic stem cells is
from umbilical cord blood. Such blood is drawn from the umbilical cord after
birth, but before the discharge of the placenta, giving way to the following
advantages:</P>
<UL style="TEXT-ALIGN: justify">
  <LI>The standard procedure at birth is that umbilical cord blood is discarded
  with the placenta. No morbidity is involved, making this option free of
  ethical controversy;
  <LI>Collection of umbilical cord blood is simple and non-invasive both to the
  mother and the baby;
  <LI>Use of umbilical cord blood is already approved by the Federal Drug
  Administration and does not require further clinical testing; </LI></UL>
<P align=center>6 </P>
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<UL style="TEXT-ALIGN: justify">
  <LI>The hematopoietic stem cells drawn from umbilical cord blood can
  differentiate into primary hematopoietic precursors and create hematopoietic
  clones in cultures better than those hematopoietic stem cells taken from adult
  bone marrow;
  <LI>Umbilical cord blood has lower levels of contamination with common viral
  pathogens, such as Cytomegalovirus, and is more tolerant of alloantigens; and
  <LI>Umbilical cord blood hematopoietic stem cells have high tolerance levels,
  giving way to lower graft- versus-host diseases. </LI></UL>
<P align=justify>It is important to note that scientists have found no
difference in the functionality of hematopoietic stem cells drawn from bone
marrow, peripheral blood or umbilical cord blood. However, two issues are
critical for umbilical cord blood for cell engraftment to become an alternative
to bone marrow transplants. The first issue is that there usually aren't enough
blood-producing stem cells in the cord blood. The blood from an average baby's
umbilical cord usually provides less than a third of the amount needed for the
average adult patient. The second is late engraftment of the cord blood compared
to a bone marrow transplant. The<SUP> </SUP>use of umbilical cord blood for
adult patients is limited due to the small cell amount in each umbilical cord.
The rate of donor hematopoietic reconstitution is lower and<SUP> </SUP>the time
to engraftment is delayed using umbilical cord blood (30-40 days for neutrophils
and platelets, dose and human leukocyte antigen match dependent) compared to
bone<SUP> </SUP>marrow grafts (15-20 days for neutrophils and platelets, dose
and human leukocyte antigen match dependent). This has prompted intensive
research on <I>ex</I><I><SUP> </SUP></I><I>vivo</I> expansion of umbilical cord
blood stem cells and umbilical cord blood graft technology that is able to
improve umbilical cord blood engraftment and reconstitution. Co-transplantation
of human hematopoietic stem cells with bone marrow mesenchymal cells has been
demonstrated to promote hematopoietic stem cell engraftment. Therefore,
co-transplantation of mesenchymal stem cells derived from placenta together with
umbilical cord blood may be considered as a promising manipulation for
improvement of the hitherto delayed engraftment using cord blood as the source
of stem cells.</P>
<P align=justify>To date, the small volume of blood collected from umbilical
cords (typically less than 100 ml), use of umbilical cord blood has been limited
to transplants in babies and children weighing less than 35 kg. Moreover, there
are no existing hematopoietic stem cell production technologies for umbilical
cord blood that can increase, to the best of our knowledge, the number of
hematopoietic stem cells without causing differentiation of the hematopoietic
stem cells. Once the hematopoietic stem cells have differentiated, they cannot
be transplanted into the patient. Therefore, the development of a system that
will facilitate the proliferation of hematopoietic stem cells in an appropriate
culture media or substrate could enable the use of such hematopoietic stem cells
drawn from umbilical cord blood for transplanting in adults where insufficient
hematopoietic stem cells are available. </P>
<P align=justify>We are working to develop a solution to the late engraftment of
the cord blood compared to a bone marrow transplant. </P>
<P align=justify>Pluristem has discovered and patented a technology process for
growing and expanding mesenchymal stem cells and hematopoietic stem cells. PLX I
mesenchymal stem cells has been proven to increase the umbilical cord blood stem
cells effectiveness by 2-4 times in a pre-clinical study. </P>
<P align=justify>Mesenchymal cells are the founding cells of many tissues like
bone, fat and cartilage and also enhance engraftment of hematopoietic stem cells
following a bone marrow transplant. Hematopoietic stem cells are the founding
cells of the hematopoietic system. They reside in the bone marrow and are
mandatory for successful bone marrow transplants.</P>
<P align=justify><B>PLX I</B> has been developed as an allogeneic product and is
based on supplementing the umbilical cord blood cells with supportive cells that
will improve the effectiveness of engraftments and shorten recovery times. After
production, PLX I is stored &#147;ready to use&#148;. The patient does not have to wait
several weeks for stem cells to grow in culture while his life is at risk. Once
a matched cord blood is found, the PLX I is ready for use immediately on arrival
at the hospital. PLX I is injected into the patient just a few hours before the
cord blood injection to improve the engraftment. Additionally, it may be
possible to &#147;boost&#148; engraftment of the hematopoietic stem cells by multiple
potential injections.</P>
<P align=justify>Initial animal study results recently published show that
sufficient engraftment is possible with the limited number of hematopoietic stem
cells available in a single portion of umbilical cord blood. This paves the way
towards using umbilical cord blood instead of bone marrow transplants for adult
patients. </P>
<P align=center>7 </P>
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<P align=justify>Pluristem derives and expands mesenchymal stem cells from human
adult tissues (such as fat or placenta) and hematopoietic stem cells from
umbilical cord blood. Umbilical cord blood is preferred over bone marrow as a
source of hematopoietic stem cells for reasons of reduced fatalities of donors
and increased efficiency to recipients. The cell expansion necessary to produce
enough stem cells for a successful transplant is executed in an environment that
mimics different naturally-occurring physiological environments. It does not
include supplemented, potentially harmful growth factors and cytokines. </P>
<P align=justify>In summary, transplants of hematopoietic stem cells derived
from umbilical cord blood are a novel alternative to conventional bone marrow
transplants and have several unique advantages, in spite of their present
quantitative limitations. Umbilical cord blood lends itself to sorting and
storing in cord blood banks and transplant clinics, leading to the ability to
build data bases of expanded umbilical cord blood for national and worldwide
access and use, making search of bone marrow transplant donors easily
facilitated and making autologus bone marrow transplants in adults potentially
feasible. We believe that the advantages in use of umbilical cord blood
hematopoietic stem cells, combined with our PLX I product would have the
potential to change the way bone marrow transplants are conducted in the
future.</P>
<P align=justify><B>Our Core Technology &#150; the PluriX&#153; Bioreactor System </B></P>
<P align=justify>For decades, scientists have attempted to &#147;grow&#148; stem cells
outside of human body in culture to increase the number of stem cells for
transplantation. The challenge of this undertaking lies in overcoming stem
cells' predisposition to differentiate. Adult hematopoietic stem cells tend to
produce other cells with limited repopulating properties when grown in culture
rather than to replicate and regenerate additional stem cells. Current stem cell
production techniques are complicated by the diverse mix of differentiated cells
generated in stem cell cultures. Existing scientific methods considered in
increasing the number of stem cells include culturing the stem cells on two
dimensional stromal layers and growing in the presence of cytokines. To the best
of our knowledge, none of these existing methods to grow stem cells outside of
patients' bodies are able to prevent differentiation of stem cells while
promoting their proliferation. </P>
<P align=justify>Through the license agreement we entered with the Weizmann
Institute of Science and the Technion-Israel Institute of Technology, we
acquired an exclusive license for an innovative stem cell production technology.
This technology, if fully developed, may offer novel solutions to expand
hematopoietic stem cells taken from umbilical cord blood. We intend to improve
this technology and develop it into a functional stem cell production system
that we can use to produce functional stem cells for sale to other research
laboratories, umbilical cord blood banks, or clinics. We have named the
technology the PluriX&#153; Bioreactor system. </P>
<P align=justify>The PluriX&#153; Bioreactor system is a system of stromal cell
cultures and substrates that create an artificial physiological environment in
which hematopoietic stem cells can grow and reproduce outside of the human body.
The system mimics the environment which exists in human bones, in which stem
cells reproduce in nature. The stem cells are &#147;tricked&#148; into growing and
reproducing in the PluriX&#153; Bioreactor in a similar way they would in living
bone, and because the size and scale of the PluriX&#153; Bioreactor can be much
bigger than a human bone, the stem cell growth can be greatly expanded. We
expect that the three dimensional PluriX&#153; Bioreactor system has the potential to
bring about the production of umbilical cord blood hematopoietic stem cells to
proportions that will be enough for transplants in adults, without promoting
differentiation. </P>
<P align=justify>We are designing and developing the PluriX&#153; Bioreactor system
to perform controlled production of hematopoietic stem cells for bone marrow
transplants. The general idea is to cause self-renewal of early stage stem cells
and prevent them from differentiating through use of the PluriX&#153; Bioreactor
system. The PluriX&#153; Bioreactor system creates an artificial physiological
environment in which hematopoietic stem cells can grow and reproduce. This
system is in direct contrast to standard teflon bags or culture flasks, which
cannot promote hematopoietic stem cells self-renewal and prevent their
differentiation. In the PluriX&#153; Bioreactor system, hematopoietic stem cells are
influenced by contact with the surrounding environment, made up of stromal cell
cultures and substrates. Therefore, by keeping the hematopoietic stem cells in
the closed environment of the PluriX&#153; Bioreactor system, the hematopoietic stem
cells maintain their original form, which means that they can proliferate
without differentiating. </P>
<P align=center>8 </P>
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<P align=justify><B>PLX II</B> is being developed as personalised product and is
based on a co-culture of expanded autologous hematopoietic stem cells from cord
blood and supporting tissue. The three dimensional stoma will be stored &#147;ready
to use&#148; and when the expansion of hematopoietic stem cells from umbilical cord
blood is needed, the stored cord blood will be cultivated on the stroma for 14
days in the PluriX bioreactor. After cultivation, the expanded hematopoietic
stem cells will be separated from the stroma and the co-culture of the expanded
hematopoietic stem cells and stroma cells will be injected.</P>
<P align=justify>We believe that the PluriX&#153; Bioreactor system, once fully
developed, will<I> </I>enable the production of certain stem cells, such as
umbilical cord blood hematopoietic stem cells, for which there might otherwise
be insufficient quantities available for transplants in adults. Having access to
a sufficient number of hematopoietic stem cells is essential to successful
clinical outcomes. This is particularly the case with umbilical cord blood
transplants. The limited quantities of available hematopoietic stem cells in
umbilical cord blood and difficulties in expanding the starting volumes to
therapeutic quantities have restricted the widespread practice of umbilical cord
blood transplants. The PluriX&#153; Bioreactor system is designed to solve this
dilemma by providing the capability to easily and cost-effectively expand
umbilical cord blood hematopoietic stem cells to higher quantities for
therapeutic treatments. </P>
<P align=justify><B>Primary Advantages of PluriX&#153; Bioreactor System</B></P>
<P align=justify>We believe our core technology, the PluriX&#153; Bioreactor system,
once fully developed, will have the following advantages:</P>
<P align=justify>1. A proprietary bioreactor (PluriX&#153;) system enables ex-vivo
expansion of hematopoietic stem cells populations in a microenvironment
resembling the architecture of natural bone marrow. </P>
<P align=justify>2. A unique micro-structure enables expansion of mesenchymal
stem cells to very high densities.</P>
<P align=justify>3. Use of co-culture methodology provides a graft product
containing both mesenchymal stem cells and hematopoietic stem cells.
Transplantation of the co-culture graft allows for better engraftment of the
hematopoietic stem cells in the recipient&#146;s bone marrow.</P>
<P align=justify>4. No use of exogenous biologics or pharmacologicals,
eliminating the risk of genetic instability and allowing safer expansions of
hematopoietic stem cells. </P>
<P align=justify>5. Use of cord blood mono-nuclear cells as the starter cohort
for expansion, instead of immuno-selected subpopulations of hematopoietic stem
cells, reduces regulatory constraints, increases expansion yields and decreases
production costs. </P>
<P align=justify><I>Markets for Our Product and Services </I></P>
<P align=justify>We plan to produce and sell stem cell products for use in bone
marrow transplants. There are presently between 40,000 to 50,000 bone marrow
transplants performed annually<B> </B>worldwide. Approximately 18,000 of these
bone marrow transplants are performed in the United States and approximately
25,000 are performed in Europe. We have not taken steps to determine the number
of bone marrow transplants performed elsewhere. Of the 40,000 to 50,000 bone
marrow transplants performed, only 5,000 are performed on babies and children.
Furthermore, most of these 40,000 to 50,000 bone marrow transplants are
allogeneic transplants, requiring patients to locate donors with compatible
hematopoietic stem cells. Based on the fact that only one in three patients
actually finds a compatible donor, if we succeed in developing stem cells that
will be compatible with more patients, as we are trying to do, we estimate that
the number of potential bone marrow transplants in the United States and Europe
would likely exceed 150,000 annually. Based on these statistics, we believe that
the existing methods of transplanting human bone marrow have not been perfected
and are far from reaching an ideal level of success.</P>
<P align=justify>Presently, standard bone marrow transplant procedure costs
approximately $100,000 per patient. 150,000 potential patients times $100,000
per patient represent $15 billion. This translates into approximately $15
billion annually<B> </B>that patients and their medical insurers around the
world may be spending. If we are successful in developing our technology and
products so that donor searches and repeat procedures are reduced, the annual
expenditures for bone marrow transplant procedures may decrease. </P>
<P align=justify><I>Intellectual Property </I></P>
<P align=justify>Our success will depend in part on our ability, and the ability
of our licensors, to obtain patent protection for our technology and products we
acquired under the license agreement with the Weizmann Institute of Science and
the Technion-Israel Institute of Technology. Under the license agreement we have
exclusive rights to the technology covering a patent application entitled
&#147;Method and Apparatus for Maintenance and Production of Hematopoietic </P>
<P align=center>9 </P>
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<P align=justify>Stem Cells and/or Progenitor Cells&#148; filed with the World
Intellectual Property Organization under the Patent Cooperation Treaty (PCT)
patent number PCT/US00/02688. Corresponding patent applications have also been
filed in a number of countries including the United States under patent
application number 09/890,401. On January 28, 2005, we received notice from the
U.S. Patent and Trademark Office that it has allowed the U.S. patent application
number 09/890,401, but changing the title of the patent from &#147;Method and
Apparatus for Maintenance and Production of Hemopoietic Stem Cells and/or
Progenitor Cells&#148; to &#147;Method of Producing Undifferentiated Hemopoietic Stem
Cells Using a Stationary Phase Plug-Flow Bioreactor&#148;. This patent allowance - No
6,911,201 provides coverage to our concept of creating a three-dimensional
bone-like environment that supports stem cell production without
differentiation. </P>
<P align=justify>Our other issued patents were issued in South Africa (patent
#2001/6486), Australia (patent #759719) Russia (patent #2249039) and New Zealand
(patent #513303) between the years 2002 and 2005. These patents are due to
expire in the years 2022 to 2025. These patents present claims to: (i) certain
apparatus for cell culturing, including a bioreactor suitable for culturing
human hematopoietic stem cells or hematopoietic progenitors cells; (ii) three
dimensional stromal cells based bioreactor. In addition, we plan to file
applications, either alone or in conjunction with our exclusive licensors, for
patents in the United States and equivalent applications in certain other
countries claiming other aspects of our technology, products and processes.</P>
<P align=justify>The validity and breadth of claims in medical technology and
products patents involve complex legal and factual questions and, therefore, may
be highly uncertain. No assurance can be given that any patents based on pending
patent applications or any future patent applications by us, or our licensors,
will be issued, that the scope of any patent protection will exclude competitors
or provide competitive advantages to us, that any of the patents that have been
or may be issued to us or our licensors will be held valid if subsequently
challenged or that others will not claim rights in or ownership of the patents
and other proprietary rights held or licensed by us. Furthermore, there can be
no assurance that others have not developed or will not develop similar
products, duplicate any of our technology or products or design around any
patents that have been or may be issued to us or our licensors. Since patent
applications in the United States are maintained in secrecy until patents are
issued, we also can not be certain that others did not first file applications
for inventions covered by our, and our licensors' pending patent applications,
nor can we be certain that we will not infringe any patents that may be issued
to others on such applications.</P>
<P align=justify>We rely on the license granted by Weizmann Institute of Science
and Technion-Israel Institute of Technology and others for the patent rights
related to our core technology, the PluriX&#153; Bioreactor system. If we breach the
license agreement or otherwise fail to comply with the license agreement, or if
the license agreement expires or is otherwise terminated, we may lose our rights
in such patents, which would have a material adverse affect on our business,
financial condition and results of operations. For complete details regarding
our license, please see the license agreement itself, which is incorporated by
reference as an exhibit to this periodic report. </P>
<P align=justify>We also rely on trade secrets and unpatentable know-how that we
seek to protect, in part, by confidentiality agreements. It has not been, but is
now our intended policy to require our employees, consultants, contractors,
manufacturers, outside scientific collaborators and sponsored researchers, board
of directors, technical review board and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements will provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with us is to be kept confidential and not disclosed
to third parties except in specific limited circumstances. We also will commence
to require signed confidentiality or material transfer agreements from any
company that is to receive our confidential information. In the case of
employees, consultants and contractors, the agreements will generally provide
that all inventions conceived by the individual while rendering services to us
shall be assigned to us as the exclusive property of Pluristem, Ltd. There can
be no assurance, however, that all persons who we desire to sign such agreements
will sign, or if they do, that these agreements will not be breached, that we
would have adequate remedies for any breach, or that our trade secrets or
unpatentable know-how will not otherwise become known or be independently
developed by competitors. </P>
<P align=justify>Our success will also depend in part on our ability to develop
our technology and commercialise cell therapy products without infringing the
proprietary rights of others. We have not conducted freedom of use patent
searches and no assurance can be given that patents do not exist or could not be
filed which would have an adverse affect on our ability to develop our
technology or maintain our competitive position with respect to our potential
cell therapy products. If our technology components, devices, designs, products,
processes or other subject matter are claimed under other existing United States
or foreign patents or are otherwise protected by third party proprietary rights,
we may be subject to infringement actions. In such event, we may challenge the
validity of such patents or other proprietary rights or we may be required to
obtain licenses from such companies in order to develop, manufacture or market
our technology or products. There can be no assurances that we would be able to
obtain such licenses or that </P>
<P align=center>10 </P>
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<P align=justify>such licenses, if available, could be obtained on commercially
reasonable terms. Furthermore, the failure to either develop a commercially
viable alternative or obtain such licenses could result in delays in marketing
our proposed products or the inability to proceed with the development,
manufacture or sale of products requiring such licenses, which could have a
material adverse affect on our business, financial condition and results of
operations. If we are required to defend ourselves against charges of patent
infringement or to protect our proprietary rights against third parties,
substantial costs will be incurred regardless of whether we are successful. Such
proceedings are typically protracted with no certainty of success. An adverse
outcome could subject us to significant liabilities to third parties and force
us to curtail or cease our development of our technology and the
commercialisation our potential cell therapy products.</P>
<P align=justify>Pluristem Life Systems Inc. filed one provisional patent with
the US Patent and Trademark Office for a new procedure for expanding
hematopoeitic stem cells and early progenitor cells from cord blood from non
selected mono-nuclear cells of the cord blood.</P>
<P align=justify>The methodologies used in current hematopoeitic stem cells
expansion protocols apply a selection stage before the enrichment stage where
the input cell population is defined by the expression of a cell membrane marker
&#150; CD34. This is a rare subpopulation of cells that are selected from large and
mixed populations of mono-nuclear cells.</P>
<P align=justify>The selection process is associated with several drawbacks.
First, it causes a substantial loss of source cells. Second and most
importantly, the selected population of cells may not represent the earliest
extractable population of hematopoeitic stem cells. Pluristem&#146;s expansion
protocol is intended to overcome both hurdles by using cord blood from
non-selected mono-nuclear cells to fuel the enrichment process.</P>
<P align=justify>This approach allows Pluristem to independently utilize two
already patent protected processes: the selection of CD34 cells and use of
proprietary manufactured cytokines. </P>
<P align=justify>Pluristem&#146;s advanced method for expanding target hematopoeitic
stem cells population from cord blood is a twofold approach. First, a
state-of-the-art patented bioreactor mimicking the natural bone marrow
environment is used. Second, mono-nuclear cells rather than CD34 selected cells
are targeted as the starting source of hematopoeitic stem cells. The efficacy of
the expansion process that utilizes non-selected mono-nuclear cells of the cord
blood is superior to what is currently being achieved by using CD34 selected
cells as the starting population of cells.</P>
<P align=justify>In May, 2006, our subsidiary, Pluristem Ltd., filed an
application for a provisional patent with the US Patent and Trademark Office for
its stem cell therapy product known as PLX-I. PLX-I is intended to offer a
breakthrough solution to improved engraftment during bone marrow transplant
procedures that use umbilical cord blood. </P>
<P align=justify>PLX-I, which consists of propagated mesenchymal stem cells that
can be co-transplanted along with the hematopoietic stem cells, is expected to
significantly improve the engraftment rate of the hematopoietic stem cells. </P>
<P align=justify>The role of PLX-I is to improve the homing of hematopoietic
stem cells and their lodgment into the patient hematopoietic niche using
mesenchymal cells. This new technology is based on Pluristem&#146;s ex vivo expanded
mesenchymal cells that are expanded within the proprietary PluriXTM high density
3-D cultures system. </P>
<P align=justify>The mesenchymal cells are expanded to achieve the quality and
amount required for improving hematopoietic stem cells and progenitor cell
repopulation, and to enhance bone marrow engraftment following stem cell
transplantation. </P>
<P align=justify><I>Research and Development </I></P>
<P align=justify>Foundational Research</P>
<P align=justify>For the last five years, our Chief Technology Officer, Dr. Shai
Meretzki, has made the initial strides in the development of our core
technology, the PluriX&#153; Bioreactor system. Research was performed by Dr.
Meretzki and his team in the laboratory of Dr. Shosh Merchav at the Technion -
Israel Institute of Technology's Rappaport Faculty of Medicine. Dr. Meretzki
also worked in close collaboration with Professor Dov Zipori and Dr. Avinoam
Kadouri, both from the Weizmann Institute of Science. Professor Zipori
specializes in cultures and stromal cells and Dr. Kadouri specializes in the
planning and creation of bioreactors. Special carriers were used in our research
and development process. In addition, this foundational research was conducted
in joint cooperation with the laboratory of SCID-NOD mice at the Weizmann
Institute of Science and with Plumacher Laboratories in Rotterdam. To this </P>
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<P align=justify>end, Plumacher Laboratories allocated a research physician to
the project for over two years. The technology resulting from this research is
the subject of our license agreement (see &#147;Intellectual Property&#148;).</P>
<P align=justify>Ongoing Research and Development Plan</P>
<P align=justify>For the next three to four years, we intend to continue
developing our stem cell production technology based on the PluriX&#153; Bioreactor
system, which will consist of four broad stages: </P>
<P align=justify>3D Stroma Culture Optimization &#150; During this stage, we are
collecting stroma cells from donor placenta tissues and growing them within the
PluriX&#153; 3-D culture. We intend to focus on optimizing the capacity of the
PluriX&#153; system to support the growth and long-term maintenance of our
high-density three dimensional stromal cells cultures.</P>
<P align=justify>Stem-cells/Stromal cells Co-Culture Development &amp;
Optimization - At this stage we intend to focus on the establishment of the
PluriX&#153; Bioreactors containing high-density cell and pluripotent hematopoietic
stem cells co-cultures; maintenance of common cells on high-density cell-coated
carriers and testing of expanded stem cells outside a host body using mice
without immune systems repopulating cells assay.</P>
<P align=justify>Stromal cells Culture Development &amp; Optimization - At this
stage we intend to focus on the establishment of Master bank of stromal cells
cultured on 3D carriers. maintenance of stromal cells on 3D carriers and testing
of expanded stromal cells outside a host body using mice without immune systems
repopulating cells assay.</P>
<P align=justify>Regulatory Approval - We intend to prepare and file with the
Food and Drug Administration and other relevant health authorities an
Investigational New Drug or an Investigational application to initiate human
clinical trials designed to demonstrate the safety, efficacy and clinical
benefits of PLX I cells. We intend to carry out all research and development
activities with the advice of a Food and Drug Administration advisor. </P>
<P align=justify><I>Employees </I></P>
<P align=justify>We presently have 15 full time employees and 2 part time
employees in research and development and 3 full time employees and 3 part time
employees in management through our wholly owned subsidiary, Pluristem, Ltd. We
presently also have 1 full time employee in the USA for our business development
activity. </P>
<P align=justify><I>Competition </I></P>
<P align=justify>The biotechnology and medical device industries are
characterised by rapidly evolving technology and intense competition. Our
competitors include major pharmaceutical, medical device, medical products,
chemical and specialized biotechnology companies, many of which have financial,
technical and marketing resources significantly greater than ours. In addition,
many biotechnology companies have formed collaborations with large, established
companies to support research, development and commercialisation of products
that may be competitive with ours. Academic institutions, governmental agencies
and other public and private research organisations are also conducting research
activities and seeking patent protection and may commercialise products on their
own or through joint ventures. We are aware of certain other products
manufactured or under development by competitors that are used for the
prevention or treatment of certain diseases and health conditions that we have
targeted for product development. There can be no assurance that developments by
others will not render our technology and our potential products obsolete or
non-competitive, that we will be able to keep pace with new technological
developments or that our potential products technology will be able to supplant
established products and methodologies in the therapeutic areas that are
targeted by us. The foregoing factors could have a material adverse affect on
our business, financial condition and results of operations. Our competition
will be determined in part by the potential indications for which our technology
and products are developed and ultimately approved by regulatory authorities. In
addition, the first product to reach the market in a therapeutic or preventive
area is often at a significant competitive advantage relative to later entrants
to the market. Accordingly, the relative speed with which we can develop
products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market are expected to be important
competitive factors. Our competitive position will also depend on our ability to
attract and retain qualified scientific and other personnel, develop effective
proprietary products, develop and implement production and marketing plans,
obtain and maintain patent protection and secure adequate capital resources. We
expect our technology, if approved for use, and our potential products, if
approved for sale, to compete primarily on the basis of product efficacy,
safety, patient convenience, reliability, value and patent position. We believe
we compete with the following larger and more established specialized
biotechnology companies that </P>
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<P align=justify>are developing devices and products to be used for the
prevention or treatment of certain diseases and health conditions that we have
targeted for product development: Osiris Therapeutics, Inc., Aastrom
Biosciences, Inc., ViaCell Inc., Gamida-Cell Ltd., Advanced Cell Technology,
Inc., BioTransplant Inc.,<B> </B>StemCell Technologies, Inc. and CellGenix.
However, to the best of our knowledge none of these companies have developed a
platform that can support production of hematopoietic stem cells without
promoting their differentiation in cytokines free conditions.</P>
<P align=justify><I>Government Regulations and Supervision </I></P>
<P align=justify>Once fully developed, we intend to market our stem cells to
research laboratories, clinics and umbilical blood banks primarily in the United
States and in Europe. Accordingly, we believe our research and development of
our technology and the production and marketing of our stem cells are subject to
the laws and regulations of governmental authorities in the United States and
all other countries where our technology will be used and our stem cells will be
marketed. Specifically, in the United States, the Food and Drug Administration,
among other agencies, regulates new product approvals to establish safety and
efficacy of these products. Governments in other countries have similar
requirements for testing and marketing. </P>
<P align=justify><B>The Regulatory Process </B></P>
<P align=justify>In the United States and in Europe, regulatory approval of new
medical devices and biological products involves a lengthy process leading from
development of a new product through pre-clinical and clinical testing. This
process takes a number of years and requires the expenditure of significant
resources. There can be no assurance that our technology will ultimately receive
regulatory approval. </P>
<P align=justify>We may develop our PluriX&#153; Bioreactor system into a
GMP-compliant cell culture system for production of<I> </I>human cells outside
of the human body for therapeutic applications. &#147;GMP&#148; is a standard set for
laboratories by the World Health Organization and other health regulatory
authorities. Therefore, to a certain degree, the manner in which the Food and
Drug Administration will regulate our PluriX&#153; Bioreactor system is uncertain.
</P>
<P align=justify>We understand that the Food and Drug Administration is still in
the process of developing its requirements with respect to somatic cell therapy
and gene cell therapy products and has issued draft documents concerning the
regulation of cellular and tissue-based products. If the Food and Drug
Administration adopts the regulatory approach set forth in the draft document,
the Food and Drug Administration will require regulatory approval for certain
human cellular or tissue based products, including cells produced in the PluriX&#153;
Bioreactor system, through a biologic license application. </P>
<P align=justify>In addition, the stem cells produced by our PluriX&#153; Bioreactor
system are potentially subject to regulation as medical products under the
Federal Food, Drug and Cosmetic Act and as biological products under the Public
Health Service Act. Different regulatory requirements may apply to our
technology depending on how they are categorized by the Food and Drug
Administration under these laws. </P>
<P align=justify>Furthermore, the Food and Drug Administration has published
regulations which require registration of certain facilities, which may include
our future clinics, and is in the process of publishing regulations for the
manufacture or manipulation of human cellular or tissue based products which may
impact our future clinics. </P>
<P align=justify>Regardless of how our technology is regulated, the Federal
Food, Drug, and Cosmetic Act and other Federal statutes and regulations govern
or influence the research, testing, manufacture, safety, labeling, storage,
record-keeping, approval, distribution, use, reporting, advertising and
promotion of our future products. Noncompliance with applicable requirements can
result in civil penalties, recall, injunction or seizure of products, refusal of
the government to approve or clear product approval applications or to allow us
to enter into government supply contracts, withdrawal of previously approved
applications and criminal prosecution. </P>
<P align=justify><B>Product Approval in the United States</B></P>
<P align=justify>We are currently only in the developmental stage of our
technology, PluriX&#153; Bioreactor system and potential products and have not begun
the process of seeking regulatory approval from the Food and Drug
Administration. Once our PluriX&#153; Bioreactor system is fully developed, we intend
to consult with a Food and Drug Administration advisor to assist us in
determining our path in the process toward gaining regulatory approval from the
Food and Drug Administration. Obtaining regulatory approval of new medical
devices and biological products from the Food and Drug Administration is a
lengthy procedure leading from development of a new product through pre-clinical
</P>
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<P align=justify>and clinical testing. This process takes a number of years and
requires the expenditure of significant resources. There can be no assurance
that our technology and potential products will ultimately receive regulatory
approval. We summarize below our understanding of the regulatory approval
requirements that may be applicable to us if we begin the process of seeking an
approval from the Food and Drug Administration. </P>
<P align=justify>Generally, in order to obtain an approval from the Food and
Drug Administration of a new medical product, an applicant must submit proof of
safety and efficacy. In some cases, such proof entails extensive pre-clinical
and clinical laboratory tests. The testing, preparation of necessary
applications and processing of those applications by the Food and Drug
Administration is expensive and may take several years to complete. There can be
no assurance that the Food and Drug Administration will act favorably or in a
timely manner in reviewing submitted applications, and an applicant may
encounter significant difficulties or costs in its efforts to obtain Food and
Drug Administration approvals, in turn, which could delay or preclude the
applicant from marketing any products it may develop. The Food and Drug
Administration may also require post-marketing testing and surveillance of
approved products, or place other conditions on the approvals. These
requirements could cause it to be more difficult or expensive to sell the
products, and could therefore restrict the commercial applications of such
products. Product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
For patented technologies, delays imposed by the governmental approval process
may materially reduce the period during which an applicant will have the
exclusive right to exploit such technologies. </P>
<P align=justify>Where human clinical trials of a proposed medical product are
required, the manufacturer or distributor of the product will have to file an
Investigational Device Exemption or Investigational New Drug submission with the
Food and Drug Administration prior to commencing human clinical trials. The
submission must be supported by data, typically including the results of
pre-clinical and laboratory testing. Following submission of the Investigational
Device Exemption or Investigational New Drug, the Food and Drug Administration
has 30 days to review the application and raise safety and other clinical trial
issues. If an applicant is not notified of objections within that period,
clinical trials may be initiated, and human clinical trials may commence at a
specified number of investigational sites with the number of patients approved
by the Food and Drug Administration. </P>
<P align=justify>The Food and Drug Administration categorizes medical devices
into three regulatory classifications subject to varying degrees of regulatory
control. In general, Class I devices require compliance with labeling and record
keeping regulations, Quality System Regulation, 510(k) pre-market notification,
and are subject to other general controls. Class II devices may be subject to
additional regulatory controls, including performance standards and other
special controls, such as post-market surveillance. Class III devices, which are
either invasive or life-sustaining products, or new products never before
marketed (for example, non-&#148;substantially equivalent&#148; devices), require clinical
testing to demonstrate safety and effectiveness and the approval of the Food and
Drug Administration prior to marketing and distribution.</P>
<P align=justify>We believe that our PluriX&#153; Bioreactor system, if successfully
developed, will be classified as a Class III medical device and be subject to
the requirements of clinical testing to demonstrate safety and efficacy and the
approval of the Food and Drug Administration before we can market the stem
cells.</P>
<P align=justify>In addition, we, and any contract manufacturer, may be required
to be registered as a medical device manufacturer with the Food and Drug
Administration. These manufacturers will be inspected on a routine basis by the
Food and Drug Administration for compliance with the Food and Drug
Administration's Quality System Regulations. The regulations of the Food and
Drug Administration would require that we, and any contract manufacturer,
design, manufacture and service products and maintain documents in a prescribed
manner with respect to manufacturing, testing, distribution, storage, design
control and service activities. The Medical Device Reporting regulation requires
that we provide information to the Food and Drug Administration on deaths or
serious injuries alleged to be associated with the use of our devices, as well
as product malfunctions that are likely to cause or contribute to death or
serious injury if the malfunction were to recur. In addition, the Food and Drug
Administration prohibits a company from promoting an approved device for
unapproved applications and reviews company labeling for accuracy. </P>
<P align=justify>Also, if we are able to successfully develop our PluriX&#153;
Bioreactor system, we believe that the stem cells produced in the PluriX&#153;
Bioreactor system will be regulated by the Food and Drug Administration as a
licensed biologic, although there can be no assurance that the Food and Drug
Administration will not choose to regulate these stem cells in a different
manner. The Food and Drug Administration categorizes human cell or tissue based
products as either minimally manipulated or more than minimally manipulated, and
has proposed that more than minimally manipulated products be regulated through
a &#147;tiered approach intended to regulate human cellular and tissue based products
only to the extent necessary to protect public health.&#148; For products which may
be regulated as biologics, </P>
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<P align=justify>the Food and Drug Administration requires: (i) preclinical
laboratory and animal testing; (ii) submission to the Food and Drug
Administration of an Investigational Device Exemption or Investigational Device
Exemption New Drug application which must be effective prior to the initiation
of human clinical studies; (iii) adequate and well-controlled clinical trials to
establish the safety and efficacy of the product for its intended use; (iv)
submission to the Food and Drug Administration of a biologic license
application; and (v) review and approval of the biologic license application as
well as inspections of the manufacturing facility by the Food and Drug
Administration prior to commercial marketing of the product. </P>
<P align=justify>Generally, pre-clinical testing covers laboratory evaluation of
product chemistry and formulation as well as animal studies to assess the safety
and efficacy of the product. The results of these tests are submitted to the
Food and Drug Administration as part of the Investigational Device Exemption.
Following the submission of an Investigational Device Exemption, the Food and
Drug Administration has 30 days to review the application and raise safety and
other clinical trial issues. If an applicant is not notified of objections
within that period, clinical trials may be initiated. Clinical trials are
typically conducted in three sequential phases. Phase I represents the initial
administration of the drug or biologic to a small group of humans, either
healthy volunteers or patients, to test for safety and other relevant factors.
Phase II involves studies in a small number of patients to assess the efficacy
of the product, to ascertain dose tolerance and the optimal dose range and to
gather additional data relating to safety and potential adverse affects. Once an
investigational drug is found to have some efficacy and an acceptable safety
profile in the targeted patient population, multi-center Phase III studies are
initiated to establish safety and efficacy in an expanded patient population and
multiple clinical study sites. The Food and Drug Administration reviews both the
clinical plans and the results of the trials and may request an applicant to
discontinue the trials at any time if there are significant safety issues. </P>
<P align=justify>The results of the pre-clinical tests and clinical trials are
submitted to the Food and Drug Administration in the form of a biologic license
application for marketing approval. The testing and approval process is likely
to require substantial time and effort and there can be no assurance that any
approval will be granted on a timely basis, if at all. Additional animal studies
or clinical trials may be requested during the Food and Drug Administration
review period that may delay marketing approval. After the Food and Drug
Administration approval for the initial indications, further clinical trials may
be necessary to gain approval for the use of the product for additional
indications. The Food and Drug Administration requires that adverse affects be
reported to the Food and Drug Administration and may also require post-marketing
testing to monitor for adverse affects, which can involve significant expense.
</P>
<P align=justify>Under current requirements, facilities manufacturing biological
products must also be licensed. To accomplish this, a biologic license
application must be filed with the Food and Drug Administration. The biologic
license application describes the facilities, equipment and personnel involved
in the manufacturing process. An establishment license is granted on the basis
of inspections of the applicant's facilities in which the primary focus is on
compliance with regulations and procedures<B> </B>and the ability to
consistently manufacture the product in the facility in accordance with the
Investigational Device Exemption. If the Food and Drug Administration finds the
inspection unsatisfactory, it may decline to approve the biologic license
application, resulting in a delay in production of products. </P>
<P align=justify>As part of the approval process for human biological products,
each manufacturing facility must be registered and inspected by the Food and
Drug Administration prior to marketing approval. In addition, state agency
inspections and approvals may also be required for a biological product to be
shipped out of state. If we are successful in developing our technology and
obtaining regulatory approval to the point where we are ready to produce stem
cells for sale, our laboratories where we will produce those cells will be
subject to all Food and Drug Administration licensing, registration and
inspection requirements.</P>
<P align=justify><B>Product Approval in Europe</B></P>
<P align=justify>If we successfully develop our PluriX&#153; bioreactor system and
potential cell therapy products and seek regulatory approval in Europe, we
believe our PluriX&#153; Bioreactor system may be regulated in Europe as a Class I
Sterile, Class IIb or Class III medical device, under the authority of the
Medical Device Directives being implemented by European Union member countries.
These classifications apply to medical laboratory equipment and supplies
including, among other products, many devices that are used for the collection
and processing of blood for patient therapy. </P>
<P align=justify>The applicable regulations vest the authority to permit
affixing of the CE Mark with various notified bodies. These are private and
state organisations which operate under license from the member states of the
European Union to certify that appropriate quality assurance standards and
compliance procedures are followed by developers and manufacturers of medical
device products or, alternatively, that a manufactured medical product meets a
more </P>
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<P align=justify>limited set of requirements. Notified bodies are also given the
responsibility for determination of the appropriate standards to apply to a
medical product. Receipt of permission to affix the CE Mark enables a company to
sell a medical device or product in all European Union member countries. Other
registration requirements may also need to be satisfied in certain countries. We
have not received permission from a notified body to affix the CE Mark to our
PluriX&#153; Bioreactor system, nor have we as yet requested such permission.</P>
<P align=justify>PLAN OF OPERATIONS </P>
<P align=justify><I>Overview </I></P>
<P align=justify>You should read the following discussion of our financial
condition and results of operations together with the unaudited financial
statements and the notes to unaudited financial statements included elsewhere in
this filing prepared in accordance with accounting principles generally accepted
in the United States. This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements. </P>
<P align=justify>We are engaged in the business of the development of the
Mesenchymal and stem cell production technology and the commercialisation of
cell therapy products. On May 5, 2003, we entered into a license agreement with
the Weizmann Institute of Science and the Technion-Israel Institute of
Technology to acquire an exclusive license for an innovative stem cell
production technology. This technology, if fully developed and commercialised,
will offer novel solutions to make procedures like bone marrow transplants and
other methods of cell therapy more accessible to patients suffering from
leukemia, lymphoma, myaloma and a broad range of complicated diseases and
disorders.</P>
<P align=justify>From May 2003 until March 2006, our business has focussed on
the development of the stem cell production technology that we license.
Originally, our plan was to develop that technology to the point where we could
sub-license it to medical scientists and practitioners for their use in
producing cell therapy products for their own use for sale in the marketplace.
On March 6, 2006, we announced that our company was taking a new direction. Now,
instead of looking to sub-lease the stem cell production technology, we will
focus on developing the technology with the goal of producing cell therapy
products for sale in the marketplace. </P>
<P align=justify>Under our licensing agreement, we have paid $400,000 cash and
we were obligated to pay royalties on our future sales and product or rights
distribution transactions. Also, the licensors of the license agreement have an
option to assign all of their patent rights in the license agreement to our
company in exchange for an aggregate of 5% of all of the issued and outstanding
share capital of our company. This option may only be exercised within a 60-day
period commencing from the date when we notify the licensors that the market
capital of our company has exceeded $25,000,000. The option will expire if it is
not exercised within this period. </P>
<P align=justify>On February 26, 2007 and on March 26, 2007 we have sent
notification to Licensors that the market capital of our company has exceeded
$25,000,000. On May 15, 2007, we entered into an Assignment Agreement with those
licensors to acquire the technology and the Patent as defined in the licenses
agreement from May 1, 2003. According to the Assignment Agreement, the Assignors
have agreed to assign its rights in the Patent in consideration of $1,962,500.
Moreover, the License Agreement shall be terminated and we are released from any
obligation to pay to the Assignors any future royalties. On the same date, the
Assignors entered into an investment agreement with us for an amount of $794,562
on the same terms which were determined in the equity investment dated May 15,
2007. </P>
<P align=justify>To enable us to conduct further research and development of the
exclusive license for the stem cell production technology we acquired from the
Weizmann Institute of Science and the Technion-Israel Institute of Technology,
on June 10, 2003, 100% of the issued and outstanding shares of a research and
development company based in Israel called Pluristem, Ltd. Pluristem, Ltd. was
incorporated under the law of Israel on January 22, 2003 and has the facilities
and personnel to conduct research and development in the field of stem cell
research. As consideration for the shares of Pluristem, Ltd., we paid to the
shareholder of Pluristem, Ltd. cash in the amount of $1,000 and provided
Pluristem, Ltd. with a line of credit in the amount of $500,000. Accordingly,
Pluristem, Ltd. became our wholly-owned subsidiary as of June 10, 2003. </P>
<P align=justify><I>Plan of Operations </I></P>
<P align=justify>You should read the following discussion of our financial
condition and results of operations together with the unaudited financial
statements and the notes to unaudited financial statements included elsewhere in
this filing </P>
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<P align=justify>prepared in accordance with accounting principles generally
accepted in the United States. This discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those anticipated in these forward-looking
statements. </P>
<P align=justify>Research and Development Costs </P>
<P align=justify>For the next twelve months, we estimate that our research and
development costs will be approximately $1,750,000. These expenses do not
include any stock based compensation measured in accordance to Statement of
Financial Accounting Standards No. 123 (revised 2004), &#147;Share-Based Payment&#148;
(&#147;SFAS 123(R)&#148;) FASB 123R. We intend to spend our research and development costs
on optimizing the 3-D bioreactor operations, developing the expanded
hematopoietic stem cell product, developing the expanded of our Placenta
Mesenchymal stem cell product, implanting stem cells from cord blood into the
stromal cell cultures of PluriX&#153; Bioreactors for production and conducting
studies on mice to examine stem cell development and production. </P>
<P align=justify>General and Administrative Expenses </P>
<P align=justify>For the next twelve months, we estimate that our general and
administrative expenses will be approximately $1,500,000. These expenses will
include management services, public relations and investor relations and
additional amounts on office and miscellaneous charges, which consist primarily
of charges incurred for purchase of office supplies and other administrative
expenses. These expenses will also include professional fees, which consist
primarily of accounting and auditing fees for the year-end audit and legal fees
for securities advice, directors liability insurance and cost of fundraising.
These expenses do not include any stock based compensation measured in
accordance to Statement of Financial Accounting Standards No. 123 (revised
2004), &#147;Share-Based Payment&#148; (&#147;SFAS 123(R)&#148;) FASB 123R. </P>
<P align=justify>We do not expect to generate any revenues from sales of
products in the next twelve months. We may generate revenues from sale of
License to use our technology. Our products will likely not be ready for sale
for at least five years, if at all. </P>
<P align=justify>In our management's opinion, we should achieve the following
events or milestones in the next twelve months in order for us to begin
generating revenues as planned in five years or more: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <P>Optimize 3-D PluriX<SUP>TM </SUP>Bioreactor operations &#150; We have made
  progress using the 3-D environment of the PluriX<SUP>TM </SUP>to produce a
  dense population of stromal supporting cells that provide a basis for stem
  cell in vitro production without differentiation. However, to have a potential
  product that we might eventually be able to market, we must continue to try to
  develop the bioreactor system until it can produce stem cells that will
  self-renew while remaining in their original state; </P>
  <LI>
  <P>Improve the analytical methods of our technology and processes; </P>
  <LI>
  <P>Conduct studies to analyze the hematopeoietic stem cell to reconstitute the
  hematopoietic system within animal model. Trials are planned using SCID mice
  which are mice with insufficient immune systems that can be used to simulate
  human blood and immune systems. Using this model, the human hematopoietic stem
  cell may develop and differentiate Pluristem's in vitro production process to
  be analyzed in vivo. </P>
  <LI>
  <P>Clarify and finalize our regulatory and medical strategy for meeting with
  the Food and Drug Administration. </P>
  <LI>
  <P>Establish relations with research centers and cord blood banks.
</P></LI></UL>
<P align=justify><I>Liquidity and Capital Resources</I></P>
<P align=justify>During the three month period ended March 31, 2007, we incurred
a net loss of $3,922,532, as compared to a net loss of $628,582 in the three
month period ended March 31, 2006. The net loss includes stock based
compensation to employees and consultants of $1,131,894 during the three month
period ended March 31, 2007, as compared to an amount of $48,182 in the three
month period ended March 31, 2006 and an expense in the amount of $1,962,500
regarding the Assignment Agreement dated May 15, 2007. This resulted from moving
forward with our research and development plan. We obtained funds to carry on
our business from private placements we conducted in October of 2004 and January
of 2005, which raised gross proceeds of approximately $3,250,000 through the
</P>
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<P align=justify>issuance of 32,500,000 units comprising one common share and
one common share purchase warrants. On April 3, 2006 we raised gross proceeds of
approximately $3,000,000 through the issuance of senior secured convertible
debentures.</P>
<P align=justify>As at March 31, 2007 we had cash of $ 4,561,645 which is
sufficient to fund our operations until early summer of 2008. On May 15, 2007,
we consummated a private equity placement with a group of investors (the
&#147;investors&#148;) for a straight equity investment. The investors shall invest a
minimum of $7,000,000 and up to a maximum of $13,500,000 for shares of our
Company's common stock, $.00001 par value at a per share price of $0.0125, and
warrant to purchase shares at an exercise price of $0.025 exercisable until five
years after the closing date of the agreement. As of May 21, 2007 we received
$6,875,000 from the investors and issued 550,000,000 shares of our Company&#146;s
common stock and issued 550,000,000 warrants to purchase our company common
stock. On January 26, 2007, the Company issued 66,000,000 warrants to finders as
finders&#146; fee in connection with introducing the Company to the investors. The
warrants are exercisable for five years at an exercise price of $0.0125. </P>
<P align=justify>As of May 21, 2007, 15,138,261 warrants, which were issued on
April 3, 2006, were exercised into shares for an amount of $1,135,349 and
17,372,510 warrants were issued on cash-less basis for 7,575,856 shares. </P>
<P align=justify>Even that we closed that financing transaction; we will have to
raise additional funds from the market before we have any cash flow from
operations. We believe that it will take several years for us to complete the
approval process for our products in the United States or any other
jurisdiction. In addition, future decisions regarding any acquisitions that we
may choose to make or product development that is beyond the scope of what is
described in our Plan of Operations will require additional capital, which must
be raised through the issuance additional securities and/or incurring more debt.
</P>
<P align=justify><I>Research and Development </I></P>
<P align=justify>Since June 10, 2003, the date we acquired Pluristem, Ltd., we
set up and began research activities in our clean rooms and laboratory. We built
bioreactors to conduct research and development in a 3-D environment and seeded
stromal cells into the bioreactors to produce the stromal cell culture where the
stem cells will be implanted. Throughout the remainder of 2007, we will continue
with the research and development activities referenced above. Since inception
to March 31, 2007, we have spent $7,429,627 on research and development. We hope
that eventually, all of this cost will be passed on to our customers.</P>
<P align=justify><I>Purchase or Sale of Equipment </I></P>
<P align=justify>With the acquisition of Pluristem Ltd., we obtained much of the
specialized laboratory equipment that we need to conduct our research. This
equipment included incubators, freezers, computers, hot plates, generators,
microscopes, and other equipment. We expect that we will upgrade our facilities
to GMP like facilities and we will spend about $500,000 on equipment that we
will need to conduct our planned research and development and manufacturing for
the next twelve months.</P>
<P align=justify><I>Going Concern </I></P>
<P align=justify>Due to our being a development stage company and not having
generated revenues, in the consolidated financial statements for the year ended
June 30, 2006, we included an explanatory paragraph regarding concerns about our
ability to continue as a going concern. Our consolidated financial statements
contain additional note disclosures describing the circumstances that lead to
this disclosure. </P>
<P align=justify>The continuation of our business is dependent upon us raising
additional financial support. The issuance of additional equity securities by us
could result in a significant dilution in the equity interests of our current
shareholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments. </P>
<P align=justify><I>Recently Issued Accounting Standards </I></P>
<P align=justify>FASB Interpretation No. 48: </P>
<P align=justify>In July 2006, the FASB issued FASB Interpretation No. 48
"Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement
No. 109" ("FIN 48"). FIN 48 clarifies the accounting for income taxes by </P>
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<P align=justify>prescribing the minimum recognition threshold a tax position is
required to meet before being recognized in the financial statements. FIN 48
utilizes a two-step approach for evaluating tax positions. Recognition (step
one) occurs when an enterprise concludes that a tax position, based solely on
its technical merits, is more-likely-than-not to be sustained upon examination.
Measurement (step two) is only addressed if step one has been satisfied (i.e.,
the position is more-likely-than-not to be sustained). Under step two , the tax
benefit is measured as the largest amount of benefit, determined on a cumulative
probability basis that is more-likely-than-not to be realized upon ultimate
settlement. </P>
<P align=justify>FIN 48 applies to all tax positions related to income taxes
subject to the Financial Accounting Standard Board Statement No. 109,
"Accounting for income taxes" ("FAS 109"). This includes tax positions
considered to be "routine" as well as those with a high degree of
uncertainty.</P>
<P align=justify>FIN 48 has expanded disclosure requirements, which include a
tabular roll forward of the beginning and ending aggregate unrecognized tax
benefits as well as specific detail related to tax uncertainties for which it is
reasonably possible the amount of unrecognized tax benefit will significantly
increase or decrease within twelve months. These disclosures are required at
each annual reporting period unless a significant change occurs in an interim
period. </P>
<P align=justify>FIN 48 is effective for fiscal years beginning after December
15, 2006. The cumulative effect of applying FIN 48 will be reported as an
adjustment to the opening balance of retained earnings. The Company does not
expect that the adoption of FIN 48 will have a significant impact on our
company's financial position and results of operations. </P>
<P align=justify>SFAS No. 157: </P>
<P align=justify>In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements ("SFAS No. 157"). This statement provides a single definition of
fair value, a framework for measuring fair value, and expanded disclosures
concerning fair value. Previously, different definitions of fair value were
contained in various accounting pronouncements creating inconsistencies in
measurement and disclosures. SFAS No. 157 applies under those previously issued
pronouncements that prescribe fair value as the relevant measure of value,
except SFAS No. 123(R) and related interpretations. The statement does not apply
to accounting standard that require or permit measurement similar to fair value
but are not intended to represent fair value. This pronouncement is effective
for fiscal years beginning after November 15, 2007. We are currently evaluating
the impact of adopting SFAS 157. </P>
<P align=justify>SFAS No. 159: </P>
<P align=justify>In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities. This statement provides
companies with an option to report selected financial assets and liabilities at
fair value. Generally accepted accounting principles have required different
measurement attributes for different assets and liabilities that can create
artificial volatility in earnings. The Standard&#146;s objective is to reduce both
complexity in accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities differently. This
Statement is effective as of the beginning of an entity&#146;s first fiscal year
beginning after November 15, 2007. The Company is currently evaluating the
impact of adopting SFAS 159. </P>
<P align=justify>Staff Accounting Bulletin No. 108:</P>
<P align=justify>In September 2006, the SEC issued Staff Accounting Bulletin No.
108 ("SAB 108") Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements, that provides
interpretive guidance on how the effects of the carryover or reversal of prior
year misstatements should be considered in quantifying a current year
misstatement. The SEC staff believes that registrants should quantify errors
using both a balance sheet and an income statement approach and evaluate whether
either approach results in quantifying a misstatement that, when all relevant
quantitative and qualitative factors are considered, is material. This
pronouncement is effective for fiscal years ending after November 15, 2006. We
are currently evaluating the provisions of SAB 108. </P>
<P align=justify><B>APPLICATION OF CRITICAL ACCOUNTING POLICIES </B></P>
<P align=justify>Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and </P>
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<P align=justify>assumptions are affected by management's application of
accounting policies. We believe that understanding the basis and nature of the
estimates and assumptions involved with the following aspects of our
consolidated financial statements is critical to an understanding of our
financials. </P>
<P align=justify><I>Going Concern </I></P>
<P align=justify>Our annual financial statements have been prepared on the going
concern basis, which assumes the realization of assets and liquidation of
liabilities in the normal course of operations. The financial statements have
been prepared assuming we will continue as a going concern. However, certain
conditions exist which raise doubt about our ability to continue as a going
concern. We have suffered recurring losses from operations and have accumulated
losses of approximately $11,977,853 since inception through the nine month
period ended March 31, 2007. </P>
<P align=justify><I>Off Balance Sheet Arrangements </I></P>
<P align=justify>Our company has no off balance sheet arrangements that are not
disclosed in our annual report on Form 10-KSB as filed with the Securities and
Exchange Commission on September 21, 2006. </P>
<P align=justify><B>RISK FACTORS </B></P>
<P align=justify><I>We have not earned any revenues since our incorporation and
only have a limited operating history in our current business of developing and
commercialising stem cell production technology, which raise doubt about our
ability to continue as a going concern.</I></P>
<P align=justify>Our company has a limited operating history in our current
business of developing and commercialising stem cell production technology and
must be considered in the development stage. We were incorporated on May 11,
2001 with a business plan to develop an artificial intelligence software called
Randomix. We were not successful in implementing our original business plan in
regard to our Randomix software and as a result we decided in April of 2003 to
pursue initiatives in the biotechnology industry as an extension to our
business. In May of 2003 we entered into a license agreement with the Weizmann
Institute of Science and the Technion-Israel Institute of Technology to acquire
an exclusive license for a stem cell production technology. In June of 2003, we
acquired our wholly-owned subsidiary, Pluristem, Ltd., based in Israel to
conduct further research and development of the exclusive stem cell production
technology licensed to us. </P>
<P align=justify>We have not generated any revenues since our inception and we
will, in all likelihood, continue to incur operating expenses without
significant revenues until we successfully develop our stem cell production
technology and commercialise our cell therapy products. Our primary source of
funds has been the sale of our common stock. We cannot assure that we will be
able to generate any significant revenues or income. These circumstances make us
dependent on additional financial support until profitability is achieved. There
is no assurance that we will ever be profitable, and we have a going concern
note as described in an explanatory paragraph to our consolidated financial
statements for the year ended June 30, 2006. </P>
<P align=justify><I>Our likelihood of profit depends on our ability to develop
and commercialise products based on our stem cell production technology, which
is currently in the development stage. If we are unable to complete the
development and commercialisation of our stem cell products successfully, our
likelihood of profit will be limited severely. </I></P>
<P align=justify>We are engaged in the business of developing and
commercialising products based on a technology and proposed device called the
PluriX&#153; Bioreactor system. The proposed function of our PluriX&#153; Bioreactor
system is to allow researchers and physicians to expand hematopoietic stem cells
outside of the human body without differentiation so they may be used in bone
marrow transplants and other methods of cell therapy. Our PluriX&#153; Bioreactor
system and our products are in the development stage and we have not begun the
regulatory approval process. We have not realized a profit from our operations
to date and there is little likelihood that we will realize any profits in the
short or medium term. Any profitability in the future from our business will be
dependent upon successful commercialisation of our potential cell therapy
products, which will require significant additional research and development as
well as substantial clinical trials. </P>
<P align=justify><I>If we encounter problems or delays in the research and
development of our PluriX&#153; Bioreactor system and our potential cell therapy
products, we may not be able to raise sufficient capital to finance our
operation during the period required to resolve the problems or delays. </I></P>
<P align=center>20 </P>
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<P align=justify>Our PluriX&#153; Bioreactor system and our cell therapy products are
currently in the development stage and we anticipate that we will continue to
incur operating expenses without significant revenues until we have successfully
completed all necessary research and clinical trials. We, and any of our
potential collaborators, may encounter problems and delays relating to research
and development, regulatory approval and intellectual property rights of our
technology. Our research and development programs may not be successful, and our
cell culture technology may not facilitate the production of cells outside the
human body with the expected result. Our PluriX&#153; Bioreactor system and our
potential cell therapy products may not prove to be safe and efficacious in
clinical trials. If any of these events occur, we may not have adequate
resources to continue operations for the period required to resolve the issue
delaying commercialisation and we may not be able to raise capital to finance
our continued operation during the period required for resolution of that issue.
Accordingly, we may be forced to discontinue or suspend our operations. </P>
<P align=justify><I>We need to raise additional financing to support the
research and development of our PluriX&#153; Bioreactor system and our products in
the future but we cannot be sure we will be able to obtain additional financing
on terms favourable to us when needed. If we are unable to obtain additional
financing to meet our needs, our operations may be adversely affected or
terminated.</I></P>
<P align=justify>We raised gross proceeds of approximately $3,000,000 through
issuing a senior convertible debenture on April 3, 2006 to support the
development and commercialisation of our PluriX&#153; Bioreactor system and our
potential cell therapy products. The funds from this financing were expected to
fund operations until early summer of 2007. On May 15, 2007, we consummated a
private equity placement with a group of investors (the &#147;investors&#148;) for a
straight equity investment. The investors shall invest a minimum of $7,000,000
and up to a maximum of $13,500,000 for shares of our Company's common stock,
$.00001 par value at a per share price of $0.0125, and warrant to purchase
shares at an exercise price of $0.025 exercisable until five years after the
closing date of the agreement. As of May 21, 2007 we received $6,875,000_ from
the investors and issued 550,000,000 shares of our Company&#146;s common stock and
issued 550,000,000 warrants to purchase our company common stock. </P>
<P align=justify>On January 26, 2007, the Company issued 66,000,000 warrants to
finders as finders&#146; fee in connection with introducing the Company to the
investors. The warrants are exercisable for five years at an exercise price of
$0.0125.</P>
<P align=justify>As of May 21, 2007, 15,138,261 warrants, which were issued on
April 3, 2006, were exercised into shares for an amount of $1,135,349. </P>
<P align=justify>Our ability to continue to develop the PluriX&#153; Bioreactor
system and commercialise our potential cell therapy products is dependent upon
our ability to raise significant additional financing when needed. If we are
unable to obtain such financing, we will not be able to fully develop our
technology and commercialise our cell therapy products. Our future capital
requirements will depend upon many factors, including: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>continued scientific progress in our research and development programs;
  <LI>costs and timing of conducting clinical trials and seeking regulatory
  approvals and patent prosecutions;
  <LI>competing technological and market developments;
  <LI>our ability to establish additional collaborative relationships; and
  <LI>the effect of commercialisation activities and facility expansions if and
  as required. </LI></UL>
<P align=justify>We have limited financial resources and to date, no cash flow
from operations and we are dependent for funds on our ability to sell our common
stock, primarily on a private placement basis. There can be no assurance that we
will be able to obtain financing on that basis in light of factors such as the
market demand for our securities, the state of financial markets generally and
other relevant factors. Any sale of our common stock in the future will result
in dilution to existing stockholders. Furthermore, there is no assurance that we
will not incur debt in the future, that we will have sufficient funds to repay
our future indebtedness or that we will not default on our future debts,
jeopardising our business viability. Finally, we may not be able to borrow or
raise additional capital in the future to meet our needs or to otherwise provide
the capital necessary to conduct the development of our PluriX&#153; Bioreactor
system and commercialisation of our potential cell therapy products, which might
result in the loss of some or all of your investment in our common stock.</P>
<P align=center>21 </P>
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<P align=justify><I>If we fail to obtain and maintain required regulatory
approvals for our PluriX&#153; Bioreactor system and our potential cell therapy
products, our ability to commercialise our potential cell therapy products will
be limited severely. </I></P>
<P align=justify>Once our PluriX&#153; Bioreactor system and our potential cell
therapy products are fully developed, we intend to market our potential cell
therapy products primarily in the United States, Europe and Japan. We must
obtain the approval of the Food and Drug Administration of our technology and
potential cell therapy products before commercialisation of our potential cell
therapy products may commence in the United States and similar agencies in
Europe. We may also be required to obtain additional approvals from foreign
regulatory authorities to commence our marketing activities in those
jurisdictions. If we cannot demonstrate the safety, reliability and efficacy of
our PluriX&#153; Bioreactor system, or of the cells produced in the PluriX&#153;
Bioreactor system, including long-term sustained cell engraftment, or if one or
more patients die or suffer severe complications in future clinical trials, the
Food and Drug Administration or other regulatory authorities could delay or
withhold regulatory approval of our technology and our potential products. </P>
<P align=justify>Furthermore, even if we obtain regulatory approval for our
PluriX&#153; Bioreactor system and our potential cell therapy products, that approval
may be subject to limitations on the indicated uses for which they may be
marketed. Even after granting regulatory approval, the Food and Drug
Administration, other regulatory agencies, and governments in other countries
will continue to review and inspect marketed products, manufacturers and
manufacturing facilities. Later discovery of previously unknown problems with a
product, manufacturer or facility may result in restrictions on the product or
manufacturer, including a withdrawal of the product from the market. Further,
governmental regulatory agencies may establish additional regulations which
could prevent or delay regulatory approval of our technology and our potential
cell therapy products. </P>
<P align=justify><I>Even if we obtain regulatory approvals to commercialise our
cell therapy products, we may encounter a lack of commercial acceptance of our
cell therapy products, which would impair the profitability of our business.
</I></P>
<P align=justify>Our research and development efforts are primarily directed
toward obtaining regulatory approval for our PluriX&#153; Bioreactor system and our
potential cell therapy products. We intend that our potential products be used
as an alternative or improvement to the cells currently harvested and used in
bone marrow transplants. Current methods of stem cell collection and use have
been widely practised for a number of years, and our technology and products may
not be accepted by the marketplace as readily as these or other competing
processes and methodologies. Additionally, our PluriX&#153; Bioreactor system and
products may not be employed in all potential applications being investigated,
and any reduction in applications would limit the market acceptance of our
technology and our potential revenues. As a result, even if we obtain all
required regulatory approvals, we cannot be certain that our PluriX&#153; Bioreactor
system and our potential cell therapy products will be adopted at a level that
would allow us to operate profitably. </P>
<P align=justify><I>If we do not keep pace with our competitors and with
technological and market changes, our technology and products may become
obsolete and our business may suffer. </I></P>
<P align=justify>The market for our products is very competitive, is subject to
rapid technological changes and varies for different individual products. We
believe that there are potentially many competitive approaches being pursued in
competition to our products, including some by private companies from which
information is difficult to obtain. Many of our competitors have significantly
greater resources, more product candidates and have developed product candidates
and processes that directly compete with our products. Our competitors may have
developed, or could in the future develop, new products that compete with our
products or even render our products obsolete. Our technology is designed to
expand hematopoietic stem cells outside of the human body without
differentiation so they may be used in bone marrow transplants and other methods
of cell therapy. Even if we are able to demonstrate improved or equivalent
results, researchers and practitioners may not use our products and we will
suffer a competitive disadvantage. Finally, to the extent that others develop
new products that address the targeted application for our products, our
business will suffer. </P>
<P align=justify><I>We depend to a significant extent on certain key personnel,
the loss of any of whom may materially and adversely affect our company.</I></P>
<P align=justify>Our success depends on a significant extent to the continued
services of certain highly qualified scientific and management personnel. We
face competition for qualified personnel from numerous industry sources, and
there can be no assurance that we will be able to attract and retain qualified
personnel on acceptable terms. The loss of service of any of our key personnel
could have a material adverse effect on our operations or financial condition.
In the </P>
<P align=center>22 </P>
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<P align=justify>event of the loss of services of such personnel, no assurance
can be given that we will be able to obtain the services of adequate replacement
personnel. We do not maintain key person insurance on the lives of any of our
officers or employees. </P>
<P align=justify><I>Our success depends in large part on our ability to develop
and protect our PluriX&#153; Bioreactor system technology and our cell therapy
products. If our patents and proprietary right agreements do not provide
sufficient protection for our PluriX&#153; Bioreactor system technology and our cell
therapy products, our business and competitive position will suffer. </I></P>
<P align=justify>We rely on an exclusive, world-wide license relating to the
production of human cells granted to us by the Weizmann Institute of Science and
Technion-Israel Institute of Technology for certain of our patent rights. If we
materially breach such agreement or otherwise fail to materially comply with
such agreement, or if such agreement expires or is otherwise terminated by us,
we may lose our rights under the patents held by the Weizmann Institute of
Science and Technion-Israel Institute of Technology. At the latest, the license
will terminate when the patents underlying the license expire. The underlying
patents will expire in approximately 2020. Also, the scope of the patents
licensed to us may not be sufficiently broad to offer meaningful protection. In
addition, the patents licensed to us could be successfully challenged,
invalidated or circumvented so that our patent rights would not create an
effective competitive barrier. We also intend to seek patent protection for any
of our potential cell therapy products once we have completed their development.
Significantly, we do not as yet have patents in the United States or Europe or
any other major market, although patents have been applied for.</P>
<P align=justify>We also rely on trade secrets and unpatentable know-how that we
seek to protect, in part, by confidentiality agreements with our employees,
consultants, suppliers and licensees. These agreements may be breached, and we
might not have adequate remedies for any breach. If this were to occur, our
business and competitive position would suffer. </P>
<P align=justify><I>We may be subject to intellectual property litigation such
as patent infringement claims, which could adversely affect our business.
</I></P>
<P align=justify>Our success will also depend in part on our ability to develop
our technology and commercially viable products without infringing the
proprietary rights of others. Although we have not been subject to any filed
infringement claims, other patents could exist or could be filed which would
prohibit or limit our ability to develop our PluriX&#153; Bioreactor system and
market our potential cell therapy products in the future. In the event of an
intellectual property dispute, we may be forced to litigate. Intellectual
property litigation would divert management's attention from developing our
technology and marketing our potential cell therapy products and would force us
to incur substantial costs regardless of whether we are successful. An adverse
outcome could subject us to significant liabilities to third parties, and force
us to curtail or cease the development and commercialisation of our PluriX&#153;
Bioreactor system. </P>
<P align=justify><I>Potential product liability claims could adversely affect
our future earnings and financial condition. </I></P>
<P align=justify>We face an inherent business risk of exposure to product
liability claims in the event that the use of our products results in adverse
affects. As a result, we may incur significant product liability exposure. We
may not be able to maintain adequate levels of insurance at reasonable cost
and/or reasonable terms. Excessive insurance costs or uninsured claims would add
to our future operating expenses and adversely affect our financial condition.
</P>
<P align=justify><I>Our principal research and development facilities are
located in Israel and the unstable military and political conditions of Israel
may cause interruption or suspension of our business operations without
warning.</I></P>
<P align=justify>Our principal research and development facilities are located
in Israel. As a result, we are directly influenced by the political, economic
and military conditions affecting Israel. Since the establishment of the State
of Israel in 1948, a number of armed conflicts have taken place between Israel
and its Arab neighbours and, since September 2000, involving the Palestinian
population, and a state of hostility, varying in degree and intensity, has led
to security and economic problems for Israel and companies based in Israel. Acts
of random terrorism periodically occur which could affect our operations or
personnel. In addition, Israeli-based companies and companies doing business
with Israel, have been the subject of an economic boycott by members of the Arab
League and certain other predominantly Muslim countries since Israel's
establishment. Although Israel has entered into various agreements with certain
Arab countries and the Palestinian Authority, and various declarations have been
signed in connection with efforts to resolve some of the economic and political
problems in the Middle East, we cannot predict whether </P>
<P align=center>23 </P>
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<P align=justify>or in what manner these problems will be resolved. Also, since
the end of September 2000, there has been a marked increase in the level of
terrorism in Israel, which has significantly damaged both the Israeli economy
and levels of foreign and local investment. Furthermore, certain of our officers
and employees may be obligated to perform annual reserve duty in the Israel
Defence Forces and are subject to being called up for active military duty at
any time. All Israeli male citizens who have served in the army are subject to
an obligation to perform reserve duty until they are between 42 and 54 years
old, depending upon the nature of their military service. </P>
<P align=justify><I>We will be subject to the requirement that of Section 404 of
the Sarbanes-Oxley Act in the future. If we will be unable to comply with the
requirement in a timely manner the market price of our stock could decline
</I></P>
<P align=justify>The Sarbanes-Oxley Act requires, among other things, that we
maintain effective internal controls for financial reporting and disclosure
controls and procedures. In particular, commencing in 2008, we must perform
system and process evaluation and testing of our internal controls over
financial reporting to allow management and our independent registered public
accounting firm to report on the effectiveness of our internal controls over
financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our
compliance with Section 404 will require that we incur substantial expense and
expend significant management efforts. If we are not able to comply with the
requirements of Section 404 in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses, the
market price of our stock could decline and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities.</P>
<P align=justify><I>Because some of our officers and directors are located in
non-U.S. jurisdictions, you may have no effective recourse against the
management for misconduct and may not be able to enforce judgement and civil
liabilities against our officers, directors, experts and agents.</I></P>
<P align=justify>Most of our directors and officers are nationals and/or
residents of countries other than the United States, and all or a substantial
portion of their assets are located outside the United States. As a result, it
may be difficult for you to enforce within the United States any judgments
obtained against our officers or directors, including judgments predicated upon
the civil liability provisions of the securities laws of the United States or
any U.S. state.</P>
<P align=justify><I>Because we do not intend to pay any dividends on our common
stock, investors seeking dividend income or liquidity should not purchase shares
of our common stock.</I></P>
<P align=justify>We have not declared or paid any dividends on our common stock
since our inception, and we do not anticipate paying any such dividends for the
foreseeable future. Investors seeking dividend income or liquidity should not
invest in our common stock.</P>
<P align=justify><I>Our stock is considered a &#147;penny stock&#148; and certain
securities rules may hamper the tradability of our shares in the market.
</I></P>
<P align=justify>Shares of our common stock are subject to rules adopted by the
Securities and Exchange Commission that regulate broker-dealer practices in
connection with transactions in &#147;penny stocks&#148;. &#147;Penny stock&#148; is defined to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our common stock are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and &#147;accredited investors.&#148; The term
&#147;accredited investor&#148; refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardised risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these </P>
<P align=center>24 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_25></A>
<P align=justify>penny stock rules. Consequently, these penny stock rules may
affect the ability of broker-dealers to trade our securities. </P>
<P align=justify><B>Item 3. Controls and Procedures. </B></P>
<P align=justify>As required by Rule 13a-15 under the Exchange Act, as of the
end of the period covered by this report, being March 31, 2007, we have carried
out an evaluation of the effectiveness of the design and operation of our
company's disclosure controls and procedures. This evaluation was carried out
under the supervision and with the participation of our management, including
our chief executive officer and chief financial officer. Based upon that
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective as of the end of the
period covered by this report. There have been no changes in our internal
controls over financial reporting that occurred during the period covered by
this report that have materially affected, or are reasonably likely to
materially affect our internal controls over financial reporting.</P>
<P align=justify>Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our company's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management, including our
president and chief executive officer as appropriate, to allow timely decisions
regarding required disclosure. </P>
<P align=center>25 </P>
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<P align=center><B>PART II - OTHER INFORMATION </B></P>
<P align=justify><B>Item 1. Legal Proceedings</B> </P>
<P align=justify>We know of no material, active or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder are an
adverse party or has a material interest adverse to us. </P>
<P align=justify><B>Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds </B></P>
<P align=justify>None. </P>
<P align=justify><B>Item 3. Defaults Upon Senior Securities. </B></P>
<P align=justify>None. </P>
<P align=justify><B>Item 4. Submission of Matters to a Vote of Security Holders.
</B></P>
<P align=justify>None. </P>
<P align=justify><B>Item 5. Other Information. </B></P>
<P align=justify>None. </P>
<P align=justify><B>Item 6. Exhibits. </B></P>
<P align=justify><I>Exhibits required by Item 601 of Regulation S-B </I></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" bgColor=#eeeeee>
      <P align=justify><STRONG>(3)</STRONG> </P></TD>
    <TD  bgColor=#eeeeee>
      <P align=justify><B>Articles of Incorporation and Bylaws</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>3.1 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Articles of Incorporation (incorporated by reference from
      our registration statement on Form SB-2 filed September 10,
  2001).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>3.2 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Bylaws (incorporated by reference from our registration
      statement on Form SB-2 filed September 10, 2001).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>3.3 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Restated Bylaws (incorporated by reference from our
      Quarterly Report on Form 10-QSB filed November 19, 2003).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>3.4 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Amended Bylaws (incorporated by reference from our
      Current Report on Form 8-K filed January 22, 2007).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD>
  <TR>
    <TD width="5%" bgColor=#eeeeee>
      <P align=justify><STRONG>(10)</STRONG> </P></TD>
    <TD  bgColor=#eeeeee>
      <P align=justify><B>Material Contracts</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>10.1 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Exclusive, World Wide Patent and Technology License and
      Assignment Agreement (incorporated by reference from our Current Report on
      Form 8-K filed May 6, 2003).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>10.2 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Form of Common Stock and Warrant Purchase Agreement
      between our company and each of the following investors who participated
      in the October 25, 2004 Private Placement (incorporated by reference from
      our registration statement on Form SB-2 filed April 27, 2005).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>10.3 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Form of Warrants between our company and each of the
      following investors who participated in the October 25, 2004 private
      placement (incorporated by reference from our registration statement on
      Form SB-2 filed April 27, 2005).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#eeeeee>10.4 </TD>
    <TD bgColor=#eeeeee>
      <P align=justify>Form of Agents&#146; Warrants between our company and each of
      the following agents who participated in the October 25, 2004 private
      placement (incorporated by reference from our registration statement on
      Form</P></TD></TR></TABLE>
<P align=center>26 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_27></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>&nbsp; </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>SB-2 filed April 27, 2005). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.5 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Common Stock and Warrant Purchase Agreement
      between our company and each of the investors who participated in the
      January 24, 2005 private placement (incorporated by reference from our
      registration statement on Form SB-2 filed April 27, 2005). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.6 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Warrants between our company and each of the
      following investors who participated in the January 24, 2005 private
      placement (incorporated by reference from our registration statement on
      Form SB-2 filed April 27, 2005). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.7 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Agents&#146; Warrants between our company and each of
      the following agents who participated in the January 24, 2005 private
      placement (incorporated by reference from our registration statement on
      Form SB-2 filed April 27, 2005). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.8 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Warrants between our company and each of the
      following investors who participated in the January 31, 2005 private
      placement (incorporated by reference from our registration statement on
      Form SB-2 filed April 27, 2005). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.9 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Agent&#146;s Warrant for 600,000 warrants between our company
      and Yokim Asset Management Corp. in respect of the January 31, 2005
      private placement. (incorporated by reference from our registration
      statement on Form SB-2 filed April 27, 2005). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.10 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Securities Purchase Agreement between our company
      and each of the investors who participated in the April 3, 2006 senior
      secured convertible debenture private placement (incorporated by reference
      from our 8-K filed April 3, 2006). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.11 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Debenture between our company and each of the
      investors who participated in the April 3, 2006 senior secured convertible
      debenture private placement (incorporated by reference from our 8-K filed
      April 3, 2006). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.12 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Warrants between our company and each of the
      investors who participated in the April 3, 2006 senior secured convertible
      debenture private placement (incorporated by reference from our 8-K filed
      April 3, 2006). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.13 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Registration Rights Agreement between our company
      and each of the investors who participated in the April 3, 2006 senior
      secured convertible debenture private placement (incorporated by reference
      from our 8-K filed April 3, 2006). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee>10.14 </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify>Form of Security Interest Agreement between our company
      and each of the investors who participated in the April 3, 2006 senior
      secured convertible debenture private placement (incorporated by reference
      from our 8-K filed April 3, 2006). </P></TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="95%" >
      <P align=justify> </P></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><B>(21)</B> </TD>
    <TD align=left width="95%" bgColor=#eeeeee >
      <P align=justify><B>Subsidiaries</B> </P></TD></TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="95%" >
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD align=left  bgColor=#eeeeee>&nbsp;</TD>
    <TD align=left width="95%"  bgColor=#eeeeee>
      <P align=justify>Pluristem, Ltd., an Israeli company.
</P></TD></TR></TABLE>
<br>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><B>(31)</B> </TD>
    <TD align=left width="95%" bgColor=#eeeeee > <P align=justify><B>Rule 13a-14(a)/15d-14(a)
        Certifications</B> </P></TD>
  </TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="95%" > <P align=justify>&nbsp;</P></TD>
  </TR>
  <TR vAlign=top bgcolor="#EEEEEE">
    <TD align=left><a href="exhibit31-1.htm">31.1* </a></TD>
    <TD width="95%" align=left > <P align=justify><a href="exhibit31-1.htm">Certification
        pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Zami Aberman
        </a></P></TD>
  </TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="95%" > <P align=justify>&nbsp;</P></TD>
  </TR>
  <TR vAlign=top bgcolor="#EEEEEE">
    <TD align=left><a href="exhibit31-2.htm">31.2* </a></TD>
    <TD width="95%" align=left > <P align=justify><a href="exhibit31-2.htm">Certification
        pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Yaky Yanay
        </a></P></TD>
  </TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="95%" > <P align=justify>&nbsp;</P></TD>
  </TR>
  <TR vAlign=top>
    <TD align=left bgColor=#eeeeee><B>(32)</B> </TD>
    <TD align=left width="95%" bgColor=#eeeeee > <P align=justify><B>Section 1350
        Certifications</B> </P></TD>
  </TR>
  <TR>
    <TD align=left >&nbsp;</TD>
    <TD align=left width="95%" > <P align=justify>&nbsp;</P></TD>
  </TR>
  <TR vAlign=top bgcolor="#EEEEEE">
    <TD align=left><a href="exhibit32-1.htm">32.1* </a></TD>
    <TD width="95%" align=left >
      <P align=justify><a href="exhibit32-1.htm">Certification
        pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
        of the Sarbanes-Oxley Act of 2002 </a></P></TD>
  </TR>
</TABLE>
<P align=justify>*Filed herewith. </P>
<P align=center>27 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
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<A name=page_28></A>
<P align=center><B>SIGNATURES </B></P>
<P align=justify>In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized. </P>
<P align=justify><B>PLURISTEM LIFE SYSTEMS, INC. </B></P>
<P align=justify>By: <u><em>/s/ Zami Aberman</em></u><BR>
  Zami Aberman, Chief Executive Officer <BR>
  (Principal Executive Officer) <BR>
  Date: May 21, 2007 </P>
<P align=justify>&nbsp;</P>
<P align=justify>By: <u><em>/s/ Yaky Yanay</em></u><BR>
  Yaky Yanay, Chief Accounting Officer <BR>
  (Principal Financial Officer and Principal Accounting Officer) <BR>
  Date: May 21, 2007 </P>
<P align=justify>&nbsp;</P>
<P align=justify>&nbsp;</P>
<P align=center>28 </P>
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<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>exhibit31-1.htm
<DESCRIPTION>SECTION 302 CERTIFICATION
<TEXT>
<!DOCTYPE HTML PUBLIC "exhibit31-1.pdf">


<HTML>
<HEAD>
   <TITLE>Filed by Automated Filing Services Inc. (604) 609-0244 - Pluristem Life Systems, Inc. - Exhibit 31.1</TITLE>
   <META name="HandheldFriendly" content="true">
</HEAD>

<BODY style="font-size:10pt;">

<HR noshade align="center" width=100% size=3 color="black">
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<P align=right><B>Exhibit 31.1 </B></P>
<P align=center><B>CERTIFICATION PURSUANT TO <BR></B><B>18 U.S.C. ss.1350, AS
ADOPTED PURSUANT TO <BR>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 </B></P>
<P align=justify>I, Zami Aberman, certify that: </P>
<P align=justify>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
I have reviewed this quarterly report on Form 10-QSB of Pluristem Life Systems,
Inc.; </P>
<P align=justify>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; </P>
<P align=justify>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report; </P>
<P align=justify>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and 15d-15(f)) for the registrant and have: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD>
      <P align=justify>Designed such disclosure controls and procedures, or
      caused such disclosure controls and procedures to be designed under our
      supervision, to ensure that material information relating to the
      registrant, including its consolidated subsidiaries, is made known to us
      by others within those entities, particularly during the period in which
      this report is being prepared;</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD>
      <P align=justify>Evaluated the effectiveness of the registrant's
      disclosure controls and procedures and presented in this report our
      conclusions about the effectiveness of the disclosure controls and
      procedures, as of the end of the period covered by this report based on
      such evaluation; and</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(c) </TD>
    <TD>
      <P align=justify>Disclosed in this report any change in the registrant's
      internal control over financial reporting that occurred during the
      registrant's most recent fiscal quarter (the registrant's fourth fiscal
      quarter in the case of an annual report) that has materially affected, or
      is reasonably likely to materially affect, the registrant's internal
      control over financial reporting; and</P></TD></TR></TABLE>
<P align=justify>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions): </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD>
      <P align=justify>All significant deficiencies and material weaknesses in
      the design or operation of internal control over financial reporting which
      are reasonably likely to adversely affect the registrant's ability to
      record, process, summarize and report financial information; and</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD>
      <P align=justify>Any fraud, whether or not material, that involves
      management or other employees who have a significant role in the
      registrant's internal control over financial
reporting.</P></TD></TR></TABLE>
<P align=justify>Date: May 21, 2007 </P>
<P align=justify>&nbsp;</P>
<P align=justify>/s/ Zami Aberman <BR>Zami Aberman <BR>Chief Executive Officer
<BR>(Principal Executive Officer) </P>
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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>exhibit31-2.htm
<DESCRIPTION>SECTION 302 CERTIFICATION
<TEXT>
<!DOCTYPE HTML PUBLIC "exhibit31-2.pdf">


<HTML>
<HEAD>
   <TITLE>Filed by Automated Filing Services Inc. (604) 609-0244 - Pluristem Life Systems, Inc. - Exhibit 31.2</TITLE>
   <META name="HandheldFriendly" content="true">
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<P align=right><B>Exhibit 31.2 </B></P>
<P align=center><B>CERTIFICATION PURSUANT TO <BR></B><B>18 U.S.C. ss.1350, AS
ADOPTED PURSUANT TO <BR>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 </B></P>
<P align=justify>I, Yaky Yanay, certify that: </P>
<P align=justify>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
I have reviewed this quarterly report on Form 10-QSB of Pluristem Life Systems,
Inc.; </P>
<P align=justify>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; </P>
<P align=justify>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report; </P>
<P align=justify>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and 15d-15(f)) for the registrant and have: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD>
      <P align=justify>Designed such disclosure controls and procedures, or
      caused such disclosure controls and procedures to be designed under our
      supervision, to ensure that material information relating to the
      registrant, including its consolidated subsidiaries, is made known to us
      by others within those entities, particularly during the period in which
      this report is being prepared;</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD>
      <P align=justify>Evaluated the effectiveness of the registrant's
      disclosure controls and procedures and presented in this report our
      conclusions about the effectiveness of the disclosure controls and
      procedures, as of the end of the period covered by this report based on
      such evaluation; and</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(c) </TD>
    <TD>
      <P align=justify>Disclosed in this report any change in the registrant's
      internal control over financial reporting that occurred during the
      registrant's most recent fiscal quarter (the registrant's fourth fiscal
      quarter in the case of an annual report) that has materially affected, or
      is reasonably likely to materially affect, the registrant's internal
      control over financial reporting; and</P></TD></TR></TABLE>
<P align=justify>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions): </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD>
      <P align=justify>All significant deficiencies and material weaknesses in
      the design or operation of internal control over financial reporting which
      are reasonably likely to adversely affect the registrant's ability to
      record, process, summarize and report financial information; and</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD>
      <P align=justify>Any fraud, whether or not material, that involves
      management or other employees who have a significant role in the
      registrant's internal control over financial
reporting.</P></TD></TR></TABLE>
<P align=justify>Date: May 21, 2007 </P>
<P align=justify>&nbsp;</P>
<P align=justify>/s/ Yaky Yanay <BR>Yaky Yanay <BR>Chief Financial Officer
<BR>(Principal Financial and Accounting Officer) </P>
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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>exhibit32-1.htm
<DESCRIPTION>SECTION 906 CERTIFICATION
<TEXT>
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   <TITLE>Filed by Automated Filing Services Inc. (604) 609-0244 - Pluristem Life Systems, Inc. - Exhibit 32.1</TITLE>
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<P align=right>EXHIBIT 32.1 </P>
<P align=center>CERTIFICATION PURSUANT TO <BR>18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO <BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </P>
<P align=justify>The undersigned, Zami Aberman, Chief Executive Officer, and
Yaky Yanay, Chief Financial Officer of Pluristem Life Systems, Inc., hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that: </P>
<P align=justify>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
the Quarterly Report on Form 10-QSB of Pluristem Life Systems, Inc. for the
quarterly period ended March 31, 2007 (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and </P>
<P align=justify>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Pluristem Life
Systems, Inc. </P>
<P align=justify>&nbsp;</P>
<P align=justify>By: /s/ Zami Aberman <BR>Zami Aberman <BR>Chief Executive
Officer <BR>Dated: May 21, 2007 </P>
<P align=justify>&nbsp;</P>
<P align=justify>&nbsp;</P>
<P align=justify>By: /s/ Yaky Yanay <BR>Yaky Yanay <BR>Chief Financial Officer
<BR>Dated: May 21, 2007 </P>
<P align=justify>A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Pluristem Life
Systems, Inc. and will be retained by Pluristem Life Systems, Inc. and furnished
to the Securities and Exchange Commission or its staff upon request.</P>
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