AI SOFTWARE INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2003

AI SOFTWARE INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2003

1. $400,000 cash is payable to the Licensor on the following terms:

1. $100,000 of which $75,000 has been paid. The balance is due within 3 months of execution of the license agreement.
2. An additional $100,000 on the earlier of the date clinical trials start using human subjects, or December 15, 2004.
3. The balance of $200,000 on the earlier of the date FDA approval is received for a product, or December 15, 2006.

2. The Company is required to raise a minimum of $500,000 for the further development of intellectual property and future products by December 15, 2003.

3. A royalty of 5% of monthly gross sales, and a 12.5% royalty on any other payments received by the Company for one time payments, such as distribution or sub-license rights, is payable to the Licensor within 30 days and 7 days respectively. The Company may also elect to pay 25% of all payments received under sub-licenses, in lieu of the 5% royalty on sales and the 12.5% royalty on lump sum payments.

4. The Company is responsible for any costs incurred for the enforcement of the patent and related intellectual property.

5. The Licensor was granted an option to assign the patent to the Company in exchange for 5% of the Company's fully diluted and outstanding share capital on the date of exercise. The option may only be exercised within 60 days of the share capital equating to an aggregate market capitalization of $25 million. If the Licensor exercises the option, all royalty payments noted in (3) will cease.

AI Software Inc. was incorporated under the laws of the state of Nevada on May 11, 2001. The Company's fiscal year end is June 30.

On July 20, 2002 our Form SB-2 registration statement was declared effective. We closed the offering on September 20, 2002, after raising a total of $100,950. All 1,009,500 shares of our common stock sold under the offering price at a price of ten cents per share, were issued as of October 14, 2002.

We currently have no revenue from operations, we are in a start-up phase with our existing assets and we have no significant assets, tangible or intangible. There can be no assurance that we will generate revenues in the future, or that we will be able to operate profitably in the future, if at all. We have incurred net losses in each fiscal year since inception of our operations.

Since July 2001, we have been engaged in software development. Our proposed business plan is premised on the use of Artificial Intelligence in computer programming technology and in many areas of the computer, Internet, robotics, and games industries. Our proposed Artificial Intelligence program, Randomix, is intended to use pattern recognition in the context of a domain name creation engine for online businesses. A domain name creation engine is essentially a website that assists computer users in picking website names which are meaningful to them. By inputting criteria into the computer that are relevant to the user's business, Randomix will use pattern recognition to generate available domain names which are relevant to the criteria entered. Pattern recognition involves recognizing and detecting patterns and trends in a given set of data.

We have exhausted all of our funding and are currently seeking additional equity or debt financing to continue with the development of Randomix. There is no assurance that we will be successful in finding such financing or on terms that would be acceptable to our Company.

During the current quarter, 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 existing business. We were successful in identifying funding and on May 1, 2003 we entered into a loan facility agreement for $100,000. On May 5, 2003, we entered into a License Agreement with the Weizmann Institute of Science and Technion-Israel Institute of Technology (the "Licensor") to acquire an exclusive license for a stem cell expansion technology. This technology offers promising, novel solutions related to bone marrow transplants.

We received an exclusive, worldwide license for the patent applied for technology over the life of the patent. It is PCT Application US00/02688 and is entitled "Method and Apparatus for Maintenance and Expansion of Hemopoietic Cells and/or Progenitor Cells". The license grants us exclusivity over all products, uses and related intellectual property, and we have the right to enter in to sub-licenses. We obtained the license on the following terms:

1. $400,000 cash is payable to the Licensor on the following terms:

1. $100,000 of which $75,000 has been paid. The balance is due within 3 months of execution of the license agreement. We obtained the initial $75,000 by a loan described in Item 5.
2. An additional $100,000 on the earlier of the date clinical trials start using human subjects, or December 15, 2004.
3. The balance of $200,000 on the earlier of the date FDA approval is received for a product, or December 15, 2006.

1. We are required to raise a minimum of $500,000 for the further development of intellectual property and future products by December 15, 2003.
2. A royalty of 5% of monthly gross sales, and a 12.5% royalty on any other payments received by us for one time payments such as distribution or sub-license rights is payable to the Licensor within 30 days and 7 days respectively. We may also elect to pay 25% of all payments received under sub-licenses, in lieu of the 5% royalty on sales and the 12.5% royalty on lump sum payments.
3. We are responsible for any costs incurred for the enforcement of the patent and related intellectual property.
4. We have granted the Licensor an option to assign the patent to our Company in exchange for 5% of our fully diluted and outstanding share capital on the date of exercise. The option may only be exercised within 60 days of the share capital equating to an aggregate market capitalization of $25 million. If the Licensor exercises the option, all royalty payments noted in (3) will cease.

Our Board of Directors has also approved a name change for our Company to Pluristem Life Systems, Inc. The name change will take effect upon receipt of an approval from stockholders owning a majority of our issued and outstanding common stock and certain other regulatory approvals.

In order to continue with our revised business plan, we will require additional equity or debt funding within approximately 2-3 months. There can be no assurance we will be successful in obtaining additional financing on favorable terms, if at all. We have limited funds to maintain our own ongoing expenses, and we currently have significant liabilities related to our ongoing software development and our stem cell license agreement. Without an infusion of new capital, we will not be able to maintain current operations beyond these periods.

We are also continuing to experience negative cash flows from operations. We will likely be required to place additional securities in new financings to make up for such negative cash flow. Such transactions may have a negative or depressing effect on the trading prices for our publicly-traded common stock.

The following discussion of the plan of operation, financial condition, results of operations, cash flows and changes in financial position of our Company should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this Form 10-QSB; and our 10-KSB filed on September 30, 2002.

At March 31, 2003, we had a deficit of working capital of $25,507, compared to a deficit of working capital of $75,403 at June 30, 2002.

At March 31, 2003, our total assets of $233 consisted solely of cash. This compares with our assets at June 30, 2002 of $16,536, consisting of cash of $961 and deferred offering costs of $15,575.

At March 31, 2003, our total current liabilities decreased to $25,740 from $91,939 at June 30, 2002. All of the $81,645 of related party loans were repaid during the period.

We have not had revenues from inception. Although there may be insufficient capital to execute our business plan, we expect to survive with funding from sales of securities and, as necessary or from shareholder loans.

Our company posted losses of $47,239 for the nine months ended March 31, 2003, compared with the losses of $54,215 for the comparable nine month period in 2002. From inception to March 31, 2003 we had losses in the amount of $125,142. The principal component of the losses is software development expenditures.

Operating expenses net of development costs for the nine months ending March 31, 2003 were $17,662, compared with operating expenses of $11,414 for the nine months ended March 31, 2002.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based on their evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 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 by us in the reports that we file under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive office and principal officer, as appropriate to allow timely decisions regarding required disclosure.

None.

On February 11, 2003 a former Director and Officer, Mr. John Guterres, transferred 1,250,000 (17,500,000 post forward split) common shares, being all of his shares in our Company, to Mr. Emmanuel Aligizakis, a current Director. The transfer occurred pursuant to an exemption from registration under Regulation S.

On March 19, 2003, Mr. Harvey Lawson and Mr. Emmanuel Aligizakis, two of our directors, each returned 975,000 (13,650,000 post forward split) shares of common stock for cancellation. The cancellation reduced our total issued and outstanding share capital from 3,509,500 (49,133,000 post forward split) shares of common stock to 1,559,500 (21,833,000 post forward split) shares. Subsequent to the cancellation, Mr. Lawson and Mr. Aligizakis each owned 275,000 (3,850,000 post forward split) shares of common stock.

On March 27, 2003, our Board of Directors approved a fourteen for one forward stock split (the "Forward Stock Split") of our authorized, issued and outstanding common stock. The Forward Stock Split was affected with the Nevada Secretary of State on March 31, 2003. As a result, our authorized capital increased from 100,000,000 to 1,400,000,000 shares of common stock with a par value of $0.00001. Our issued and outstanding share capital increased from 1,559,500 shares of common stock to 21,833,000 shares of common stock. The Forward Stock Split took effect with the OTC Bulletin Board at the opening for trading on Tuesday, April 8, 2003 under the new stock symbol ASOW. Our new CUSIP number is 00144U 20 9.

None.

We submitted no matters to a vote of security holders during the quarter ended March 31, 2003.

On March 18, 2003, our Board of Directors increased the number of our current Directors from two (2) to three (3). We also appointed Meir Segev as a director to fill the vacancy created by the increase of number of current Directors.

On May 1, 2003 we entered into a loan agreement to borrow up to $100,000. The loan is unsecured, due on August 1, 2003 and bears interest at LIBOR plus 2%. We have borrowed $75,000 under the loan agreement to date and paid the funds towards the stem cell technology License Agreement described in ITEM 2.

Our principal accountant was dismissed on May 7, 2003. The decision to change accountants was approved by our board of directors.

There were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the former accountants satisfaction, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report.

A new accountant has been engaged as the principal accountant to audit our financial statements. The new accountant is Marc Lumer & Company and was engaged as of May 9, 2003. Neither our Company nor anyone acting on our behalf consulted the new accountant regarding:

1. The application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the small business issuer's financial statements, as part of the process of deciding as to the accounting, auditing or financial reporting issue, or
2. Any matter that was the subject of a disagreement or event identified in above.

Our Company has provided the former accountant with a copy of the disclosures it is making in response to this Item. We have requested that the former accountant furnish a letter addressed to the Commission stating that they agree with the statements made by the Company.

On May 7, 2003 our Board of Directors approved the change of name for our Company to Pluristem Life Systems, Inc. The name change will be effective upon our receipt of an approval by stockholders of a majority of our issued and outstanding common stock and certain other regulatory approvals.

March 20, 2003 increasing the number of Directors for the Company from 2 to 3, and the appointment of Mr. Meir Segey as a Director.

March 28, 2003, reporting the cancellation of 975,000 shares by each of Mr. Harvey Lawson and Mr. Emmanuel Aligizakis.

April 8, 2003 regarding the approval by the Board of Directors to forward split the Company's authorized and outstanding common stock on a fourteen for one basis.

May 5, 2003, License Agreement with the Weizmann Institute of Science and Technion -Israel Institute of Technology to acquire an exclusive licence for a stem cell expansion technology to assist with bone marrow transplants.

May 13, 2003, reporting the dismissal the Company's certifying accountants, Davidson & Company, and the engagement of Marc Lumer & Company, Certified Public Accountants and Management Consultants, as the Company's principal independent accountants.

1. I have reviewed this quarterly report on Form 10 QSB of AI Software Inc.;

2. 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 quarterly report;

3. 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;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:

1. designed such disclosure controls and procedures 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 quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
3. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 19, 2003