Pluri Inc

NOTE 1: - GENERAL

NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement have been included (consisting only of normal recurring adjustments). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023. The year-end balance sheet data was derived from the audited consolidated financial statements as of June 30, 2023, but not all disclosures required by GAAP are included.

Operating results for the nine-month period ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending June 30, 2024.

The significant accounting policies followed in the preparation of these interim unaudited condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments and assumptions that are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, short-term bank deposits, long-term bank deposit and restricted bank deposits and other current assets, trade payable and other accounts payable and accrued expenses, approximate their fair value because of their generally short-term maturities.

The Company measures its derivative instruments at fair value under Accounting Standards Codification (“ASC”), “Fair Value Measurements and Disclosures” (“ASC 820”). Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company categorized each of its fair value measurements in one of these three levels of hierarchy.

On April 30, 2020, the German Subsidiary entered into a finance contract (the “Finance Contract”) with the EIB, pursuant to which the German Subsidiary can obtain a loan in the amount of up to €50 million, subject to certain milestones being reached (the “Loan”).

During June 2021, Pluri received €20 million under the Finance Contract. The amount received is due on June 1, 2026, and bears annual interest of 4% to be paid with the principal of the Loan.

The Company measures its liability pursuant to the Finance Contract with the EIB based on the aggregate outstanding amount of the combined principal and accrued interest thereunder. As of March 31, 2024, the Company does not reflect its liability for future royalty payments pursuant to the Finance Contract with the EIB since the accrual liability pertaining to royalties to EIB is immaterial (see also note 4).

ASU No. 2016-13 - “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”):

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities are required to use a new forward-looking “expected loss” model that generally results in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. The amendments contained in ASU 2016-13 were originally effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years for the Company. In November 2019, the FASB issued ASU No. 2019-10, which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission (“SEC”) rules) to fiscal years beginning after December 15, 2022, including interim periods.

The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company meets the SEC definition of a smaller reporting company and adopted the new accounting standard effective July 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

ASU No. 2023-07 - “Segment Reporting (Topic 280): Improvements to reportable segment disclosures” (“ASU 2023-07”):

In November 2023, the FASB issued ASU 2023-07. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition of other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for the fiscal year beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.

NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

ASU No. 2023-09 - “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”):

In December 2023, the FASB issued ASU 2023-09. This guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and regarding income tax paid both in the U.S. and foreign jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption and retroactive application are permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.

NOTE 3: - COMMITMENTS AND CONTINGENCIES

As of March 31, 2024, the Company’s contingent liability in respect to royalties to the IIA amounted to $27,746, not including LIBOR (from January 1, 2024, SOFR) interest as described above.

NOTE 4: - LOAN FROM THE EIB

On April 30, 2020, the German Subsidiary entered into a Finance Contract with the EIB, pursuant to which the German Subsidiary can obtain a loan in the amount of up to €50 million, subject to certain milestones being reached, for a period of 36 months from the signing of the Finance Contract.

During June 2021, Pluri received €20 million of the Finance Contract. The amount received is due on June 1, 2026, and bears annual interest of 4% to be paid with the principal of the Loan. As of March 31, 2024, the linked principal balance in the amount of $21,620 and the interest accrued in the amount of $2,445 are presented among long-term liabilities. Since the project period ended on December 31, 2022, the Company does not expect to receive additional funds pursuant to the Finance Contract.

In addition to interest payable on the Loan, the EIB is entitled to receive royalties from revenues for a period of seven years starting at the beginning of fiscal year 2024 and continuing up to and including its fiscal year 2030 in an amount equal to between 0.2% to 2.3% of the Company’s consolidated revenues, pro-rated to the amount disbursed from the Loan. As of March 31, 2024, the accrual liability pertaining to royalties to EIB is immaterial.

The Finance Contract also contains certain limitations such as the use of proceeds received from the EIB, limitations related to disposal of assets, substantive changes in the nature of the Company’s business, changes in holding structure, distributions of future potential dividends and engaging with other banks and financing entities for other loans.

NOTE 5: - SHAREHOLDERS’ EQUITY

Between December 13, 2022 and December 27, 2022, the Company entered into a series of securities purchase agreements with several purchasers for an aggregate of 1,019,488 common shares and warrants, (the “Warrants”) to purchase up to 1,019,488 common shares (the “December 2022 Private Placement”). On December 13, 2022, the Company executed securities purchase agreements to sell, at a purchase price of $8.24 per share, up to 697,486 common shares and Warrants to purchase up to 697,486 common shares, with an exercise price of $8.24 per share and a term ofthree years. On December 14, 2022, the Company executed securities purchase agreements to sell, at a purchase price of $8.4 per share, up to 258,565 common shares and Warrants to purchase up to 258,565 common shares, with an exercise price of $8.4 per share and a term ofthree years. On December 15, 2022, the Company executed securities purchase agreements to sell, at a purchase price of $8.48 per share, up to 29,688 common shares and Warrants to purchase up to 29,688 common shares, with an exercise price of $8.48 per share and a term ofthree years. On December 19, 2022, the Company executed a securities purchase agreement to sell, at a purchase price of $8.72 per share, up to 16,875 common shares and Warrants to purchase up to 16,875 common shares, with an exercise price of $8.72 per share and a term ofthree years. On December 27, 2022, the Company executed a securities purchase agreement to sell, at a purchase price of $8.96 per share, up to 16,875 common shares and Warrants to purchase up to 16,875 common shares, with an exercise price of $8.96 per share and a term ofthree years. The Warrants sold in the December 2022 Private Placement are exercisable upon the later of six months from their issuance date, or from the date the Company increased its authorized shares. The Company issued 1,019,488 common shares and Warrants that relate to the December 2022 Private Placement and received $8,034 as of that date net of $435 from issuance expenses.

On August 31, 2023, and as amended and restated as of October 9, 2023, Ever After entered into a Simple Agreement for Future Equity (the “SAFE Agreement”) with an investor. Pursuant to the terms of the SAFE Agreement, Ever After will receive an aggregate amount of $2,500 (the “SAFE Amount”). As of December 31, 2023, the SAFE Agreement had been terminated and the SAFE Amount was not received.

Pursuant to a shelf registration on Form S-3 declared effective by the SEC on September 21, 2023, on February 13, 2024 the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) which provides that, upon the terms and subject to the conditions and limitations in the Sales Agreement, the Company may elect, from time to time, to offer and sell common shares having an aggregate offering price of up to $10,000 through A.G.P. acting as sales agent. During April 2024, and after the balance sheet date, the Company sold 42,729 common shares under the Sales Agreement at an average price of $5.93 per share.

A summary of the share options to non-employee consultants under equity incentive plans of Pluri Inc. is as follows:

Compensation expenses recorded in general and administrative expenses related to options granted to consultants for the nine months ended March 31, 2024 and 2023 were $5 and $5, respectively. Compensation expenses recorded in general and administrative expenses related to options granted to consultants for the three months ended March 31, 2024 and 2023 were $4 and $1, respectively.

NOTE 5: - SHAREHOLDERS’ EQUITY (CONT.)

A summary of the share options granted to the Chief Executive Officer and Director under equity incentive plans of Pluri Inc. is as follows:

As of March 31, 2024, the aggregate intrinsic value of these options was $0.

Compensation expenses recorded in general and administrative expenses related to options granted to the Chief Executive Officer and a director for the nine months ended March 31, 2024 and 2023, were $223 and $310, respectively.

Compensation expenses recorded in general and administrative expenses related to options granted to the Chief Executive Officer and a director for the three months ended March 31, 2024 and 2023, were $10 and $310, respectively.

The following table summarizes the activity related to RSUs granted to employees, directors and officers under equity incentive plans of Pluri Inc. for the nine-month periods ended March 31, 2024 and 2023:

NOTE 5: - SHAREHOLDERS’ EQUITY (CONT.)

Compensation expenses related to RSUs granted to employees, directors and officers were recorded as follows:

As of March 31, 2024, unamortized compensation expenses related to RSUs granted to employees, directors and officers by Pluri Inc. are approximately $3,801, to be recognized by the end of January 2027.

The following table summarizes the activity related to RS and RSUs granted to consultants for the nine-month periods ended March 31, 2024 and 2023:

Compensation expenses related to RS and RSUs granted to consultants by Pluri Inc. were recorded as follows: